<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-22863
EAGLE GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0522659
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 BRIAR HOLLOW LANE
6TH FLOOR WEST
HOUSTON, TEXAS
(Address of Principal 77027
Executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (713) 881-2800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 14 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, as of August
14, 1998: 8,587,360
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EAGLE GEOPHYSICAL, INC.
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- Financial Information............................. 3
Item 1. Financial Statements................................ 3
Consolidated Balance Sheets -- June 30, 1998 (unaudited) and
December 31, 1997......................................... 3
Consolidated Statements of Operations for the three and six
month periods ended June 30, 1998 and 1997 (unaudited).... 4
Consolidated Statements of Cash Flows for the six month
periods ended June 30, 1998 and 1997 (unaudited).......... 5
Consolidated Statement of Stockholders' Equity.............. 6
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
PART II -- Other Information
Item 4...................................................... 16
Item 6...................................................... 16
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
EAGLE GEOPHYSICAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of
$5,000 (unaudited) and $4,502 at June 30, 1998 and
December 31, 1997, respectively......................... $ 15,912 $ 19,482
Receivables:
Trade, billed, Net of Allowance for Doubtful Accounts of
$450 (unaudited) at June 30, 1998 and $132 at December
31, 1997............................................... 12,941 11,291
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 2,313 2,576
Other................................................... 3,840 546
Due from affiliate........................................ 9,988 12,500
Inventory................................................. 3,032 1,705
Prepaid expenses and other assets......................... 2,151 2,788
-------- --------
Total current assets............................... 50,177 50,888
PROPERTY AND EQUIPMENT, AT COST:
Geophysical equipment..................................... 145,310 69,418
Furniture, fixtures and other............................. 1,071 652
-------- --------
146,381 70,070
Less: Accumulated depreciation.............................. (22,363) (14,873)
-------- --------
Net property and equipment......................... 124,018 55,197
MULTI-CLIENT DATA LIBRARY................................... 6,615 --
GOODWILL, NET............................................... 19,877 17,990
OTHER LONG-TERM ASSETS...................................... 175 230
-------- --------
TOTAL ASSETS....................................... $200,862 $124,305
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 1,014 $ --
Current portion of capital lease obligations.............. 5,847 2,816
Accounts payable.......................................... 28,943 15,671
Accrued liabilities....................................... 13,879 7,849
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 9,454 6,029
-------- --------
Total current liabilities.......................... 59,137 32,365
LONG-TERM DEBT.............................................. 27,270 --
CAPITAL LEASE OBLIGATIONS................................... 25,421 7,944
DEFERRED INCOME TAXES AND OTHER OBLIGATIONS................. 1,214 --
-------- --------
TOTAL LIABILITIES.................................. 113,042 40,309
-------- --------
CONTINGENCIES AND COMMITMENTS STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued
and outstanding......................................... -- --
Common stock, par value $.01 per share; authorized
25,000,000 shares; issued and outstanding 8,587,360
(unaudited) shares at June 30, 1998 and 8,489,000 at
December 31, 1997....................................... 86 85
Additional paid-in capital................................ 83,566 82,622
Retained earnings......................................... 4,593 1,714
Note receivable from Stockholder.......................... (425) (425)
-------- --------
TOTAL STOCKHOLDERS' EQUITY......................... 87,820 83,996
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $200,862 $124,305
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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EAGLE GEOPHYSICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH SIX MONTH
PERIODS ENDED PERIODS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES(1)............................................ $34,336 $15,785 $58,216 $28,766
EXPENSES
Operating expenses (exclusive of depreciation and
amortization shown below)(1)...................... 22,527 11,493 39,966 20,779
Depreciation and amortization........................ 4,799 1,470 7,687 2,772
Selling, general and administrative expenses......... 2,877 1,115 5,373 1,565
Interest expense..................................... 468 336 656 612
Interest income...................................... (174) (460) (395) (578)
Other, net........................................... 44 -- 90 --
------- ------- ------- -------
30,541 13,954 53,377 25,150
------- ------- ------- -------
Income before provision for income taxes............... 3,795 1,831 4,839 3,616
Provision for income taxes............................. 1,537 671 1,960 1,326
------- ------- ------- -------
NET INCOME............................................. $ 2,258 $ 1,160 $ 2,879 $ 2,290
======= ======= ======= =======
Basic earnings per share............................... $ .26 $ .34 $ .34 $ .67
======= ======= ======= =======
Weighted average number of common shares (basic)....... 8,587 3,400 8,543 3,400
======= ======= ======= =======
Diluted earnings per share............................. $ .26 $ .34 $ .34 $ .67
======= ======= ======= =======
Weighted average number of common shares (diluted)..... 8,598 3,400 8,553 3,400
======= ======= ======= =======
</TABLE>
- ---------------
(1) Includes revenue from affiliates of $18,237, $32,546, $7,131, and $15,212
for the unaudited three and six month periods ended June 30, 1998 and 1997,
respectively, and operating expenses related to such affiliate revenue of
$12,757, $24,961, $4,775, and $11,210 for the unaudited three and six month
periods ended June 30, 1998 and 1997, respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
4
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EAGLE GEOPHYSICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTH PERIODS
ENDED JUNE 30,
------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 2,879 $ 2,290
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 7,687 2,772
Gain on sale of property and equipment.................... (10) (18)
Deferred income tax provision............................. 386 128
Bad debt expense.......................................... 450 --
Decrease in receivables................................... 1,930 3,005
(Increase) decrease in other assets....................... (10,402) 240
Increase in accounts payable and other liabilities........ 20,993 1,479
-------- -------
Total adjustments................................. 21,034 7,606
-------- -------
Net cash provided by operating activities......... 23,913 9,896
-------- -------
Cash flows from investing activities:
Purchase of property and equipment.......................... (45,159) (8,098)
Cash received on disposal of property and equipment......... 152 27
Cash paid for Seismic Drilling & Services, Inc., net of cash
acquired.................................................. (3,516) --
-------- -------
Net cash used in investing activities............. (48,523) (8,071)
-------- -------
Cash flows from financing activities:
Borrowings under credit facility.......................... 30,500 --
Repayments under credit facility.......................... (8,000) --
Borrowings under term loans............................... -- 7,925
Principal payments on term loans.......................... (81) (1,943)
Principal payments on capital leases...................... (1,199) (681)
Payment to affiliate...................................... -- (7,115)
Other, net................................................ (180) --
-------- -------
Net cash provided by (used in) financing
activities....................................... 21,040 (1,814)
-------- -------
Net increase (decrease) in cash and cash equivalents........ (3,570) 11
Cash and cash equivalents at beginning of period............ 19,482 --
-------- -------
Cash and cash equivalents at end of period.................. $ 15,912 $ 11
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................................. $ 628 $ 339
======== =======
Income taxes.............................................. $ 1,741 $ --
======== =======
Noncash investing & financing activities:
Vessel upgrade financed through a capital lease........... $ 21,707 $ --
======== =======
Purchase of Seismic Drilling & Services, Inc. for 98,360
shares of common stock................................. $ 1,125 $ --
======== =======
Contribution of Investment in Energy Research
International by Seitel................................ $ -- $ 914
======== =======
Equipment purchase through term loan...................... $ 5,864 $ --
======== =======
Equipment purchased through capital leases................ $ -- $ 374
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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EAGLE GEOPHYSICAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
--------------- PAID-IN RETAINED FROM STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDER EQUITY
------ ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997............. 8,489 $85 $82,622 $1,714 $(425) $83,996
Unaudited:
Acquisition of Seismic Drilling &
Services, Inc..................... 98 1 1,124 -- -- 1,125
Net Income........................... -- -- -- 2,879 -- 2,879
Other, net........................... -- -- (180) -- -- (180)
----- --- ------- ------ ----- -------
Balance, June 30, 1998................. 8,587 $86 $83,566 $4,593 $(425) $87,820
===== === ======= ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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EAGLE GEOPHYSICAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACTIVITIES
The accompanying unaudited interim condensed financial statements of Eagle
Geophysical Inc. (the "Company") for the six months ended June 30, 1998 and 1997
have been prepared without an audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to present
fairly the financial position, results of operations, and cash flows for all
periods presented have been made. Operating results for the interim period are
not necessarily indicative of the results that can be achieved for a full year.
It is suggested that these interim condensed financial statements be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K.
In July 1998, the Company completed an offering (the "Offering") of $100
million 10 3/4% Senior Notes due 2008 resulting in net proceeds to the Company
of approximately $96.4 million after deducting offering-related expenses. The
Company used approximately $27.5 million of the proceeds to repay borrowings
under the Short-Term Loan and Revolving Credit Facility used for upgrades to the
Austral Horizon and the Atlantic Horizon and will use the rest of the proceeds
to fund the remaining upgrades of these two vessels.
In April 1998, the Company entered into an agreement with British Linen
Bank for the financing of the Labrador Horizon upgrades and the purchase of the
vessel for a total commitment of approximately $31.3 million. The facility bears
interest at a rate of LIBOR plus 1.375% and required the Company to enter into a
lease purchase agreement with British Linen Bank for a period of five years that
commenced upon completion of the upgrades. The facility requires a security
deposit of approximately $5 million with scheduled amounts to be refunded based
upon a predetermined formula. Additionally, the Company has the option to
acquire the vessel at the end of the lease purchase agreement for a price of .1%
of the total facility commitment.
In April 1998, the Company obtained a term loan with Fleet Capital
Corporation for the financing of an Opseis system for approximately $5.9
million. The loan is for a period of five years and bears interest at a fixed
rate of 7.36%. Monthly payments of approximately $117,000 will be made under the
loan with the Opseis system pledged as security for the loan.
On March 24, 1998, the Company completed the acquisition of a shot-hole
drilling company for a price of approximately $6.3 million, consisting of
approximately $4.3 million in cash, 98,360 shares of the Company's common stock
and deferred compensation payable to the former owner of $500,000. This company
was a privately held provider of seismic shot-hole drilling and related
front-end services for the seismic data acquisition industry.
In March 1998, the Company replaced one of its chartered offshore seismic
vessels working in the U.S. Gulf of Mexico, the Abshire Tide, with a newer, more
capable vessel, the Celtic Horizon.
2. EARNINGS PER COMMON SHARE
Net income per share of common stock has been computed on the basis of the
weighted average number of common shares outstanding during the period and,
where dilutive, the effect of common stock contingently issuable, which arises
primarily from the exercise of stock options, in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS"), No. 128 "Earnings Per
Share". The weighted average shares of common stock outstanding for the
calculation of basic earnings per share was 8,587,000, 8,543,000, 3,400,000 and
3,400,000 for the three and six month periods ending June 30, 1998 and 1997
respectively. The weighted average shares of common stock outstanding for the
calculation of diluted earnings per share was 8,598,000, 8,553,000 3,400,000 and
3,400,000 for the three and six month periods ending June 30, 1998 and 1997
respectively.
7
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3. PRO FORMA RESULTS OF OPERATIONS
On August 11, 1997, the Company completed the acquisition of the remaining
81% interest in Energy Research International ("ERI") with the issuance of
600,000 shares of common stock for a purchase price valued at approximately $8.4
million. On August 11, 1997 and September 5, 1997, the Company completed the
offering and sale of a total of 6,524,000 shares of common stock to the public
at a price of $17 per share (including 1,880,000 shares sold by the Company's
former parent, Seitel, Inc. and 180,000 shares sold by the former owners of ERI)
resulting in net proceeds of $69.1 million after deducting offering related
expenses (the "IPO"). The following table presents the unaudited pro-forma
effects of the IPO and the application of the net proceeds thereof to retire
certain debt and capital leases, and the purchase of ERI as if such transactions
had occurred on January 1, 1997:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Pro Forma Revenue.............................. $34,336 $26,881 $58,216 $50,060
Pro Forma Income Before Taxes.................. 3,795 1,422 4,839 4,062
Pro Forma Net Income........................... 2,258 1,027 2,879 3,217
Pro Forma Weighted Average Common Shares
Outstanding -- (Basic)....................... 8,587 8,489 8,543 8,489
Pro Forma Basic Earnings Per Common Share...... $ .26 $ .12 $ .34 $ .38
======= ======= ======= =======
</TABLE>
4. LONG-TERM DEBT
The Company had the following debt outstanding as of June 30, 1998 and
December 31, 1997 (in thousands) :
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Borrowings pursuant to a revolving credit facility with Bank
One Texas N.A............................................. $20,000 $ --
Borrowings pursuant to the Short-Term Loan with Bank One
Texas N.A................................................. 2,500 --
Fleet Capital Term Loan..................................... 5,784 --
------- ----
Less amounts due within one year............................ (1,014) --
------- ----
Total long-term debt........................................ $27,270 $ --
======= ====
</TABLE>
The Company has an agreement with Bank One, Texas N.A. with respect to a
$20,000,000 revolving credit facility secured by the Company's accounts
receivable ("the Bank One Credit Facility"). The amount the Company may borrow
under the facility is limited to a borrowing base that is equal to 90% of the
eligible U.S. and U.K. investment grade accounts receivable, as defined, 100% of
receivables secured by acceptable letters of credit, and 80% of eligible
non-investment grade domestic and other foreign receivables. Interest only is
payable monthly or at the end of LIBOR interest periods, and the credit facility
is payable in full on June 1, 1999.
Mandatory prepayments are required if borrowings exceed the borrowing base.
Interest accrues under the credit facility at the bank's base rate or LIBOR plus
a spread of 1.375% if the Company's debt to net worth ratio is less than 1 to 1,
and 1.625% if such ratio is equal to or greater than 1 to 1. As of June 30,
1998, the Company had a borrowing base of approximately $20.0 million under this
facility and $20.0 million of borrowings were outstanding. On July 20, 1998, the
$20 million of borrowings outstanding was repaid with proceeds from the
Offering. The Company is currently out of compliance with one of the financial
covenants of the Bank One Credit Facility, and has obtained a waiver of such
covenant from Bank One.
8
<PAGE> 9
In April 1998, the Company obtained a term loan with Fleet Capital
Corporation for the financing of an Opseis system for approximately $5.9
million. The loan is for a period of five years and bears interest at a fixed
rate of 7.36%. Monthly payments of approximately $117,000 will be made under the
loan with the Opseis system pledged as security for the loan.
In June 1998, the Company entered into the $29.0 million Short-Term Loan
with Bank One, Texas, N.A. to fund part of the cost of the upgrades to the
Austral Horizon and the Atlantic Horizon pending completion of the Offering. The
maximum amount borrowed under this loan was $7.5 million, which was repaid in
full on July 20, 1998. Interest accrued under this loan at the bank's base rate
or LIBOR plus 2% and was payable monthly or at the end of applicable LIBOR
interest periods.
5. COMMITMENTS AND CONTINGENCIES
The Company is involved in or threatened with various legal proceedings
from time to time arising in the normal course of business. Management of the
Company does not believe that any liabilities resulting from such proceedings
will have a material adverse effect on its operations or financial position.
The Company generally provides services to a relatively small number of
customers, so that individual customers account for significant portions of the
Company's accounts receivable at any given time. Credit losses incurred on
receivables have historically been immaterial to the Company. The Company
currently has one receivable from a customer of $2,384,000 that is over one year
old. Management currently believes that this receivable is collectible, although
in light of the age of this receivable, the Company has increased its reserve
for doubtful accounts to $450,000 as of June 30, 1998.
6. RELATED PARTY TRANSACTIONS
Prior to the Offering, the Company was a wholly-owned subsidiary of Seitel,
Inc. Seitel currently owns approximately 17.7% of the outstanding common stock
of the Company. The Company enters into various types of transactions with
Seitel and its subsidiaries. The Company performs seismic data acquisition
services for Seitel's seismic data library subsidiary and its exploration and
production subsidiary. For the unaudited three and six month periods ended June
30, 1998 and 1997, the Company recognized revenue of $18,237,000, $32,546,000,
$7,131,000 and $15,212,000, respectively, for seismic data acquisition services
performed for Seitel's subsidiaries. Prior to August 11, 1997, such revenues
from affiliates were based on prices charged to unaffiliated third parties for
similar work. Gross margin recognized on work for affiliates was limited in each
reporting period to the total margin percentage earned on work for unaffiliated
parties. Subsequent to August 11, 1997, revenues from affiliates were based on
agreed upon contractual amounts and terms similar to contracts with other third
party customers.
Prior to the Offering the Company reimbursed Seitel for direct and indirect
costs of certain Seitel employees who provided services to the Company and for
other costs, primarily general and administrative expenses, related to the
Company's operations. Seitel allocated indirect costs to the Company using a
formula based upon the ratio of the Company's levels of revenue, number of
personnel or other factors, as applicable, to the total consolidated Seitel
levels for such factors. Management of the Company believes that the use of such
formula resulted in a reasonable allocation of indirect costs. During the
unaudited period from January 1, 1997 to June 30, 1997, the Company recorded
general and administrative costs allocated from Seitel of $645,000. Prior to
August 11, 1997, Seitel funded the Company's direct operating costs through
intercompany advances and was reimbursed for such advances as the Company had
available cash. Amounts payable to or receivable from Seitel and its
subsidiaries bore interest at the same rates which Seitel was charged or
received. During the unaudited period from January 1, 1997 to June 30, 1997, the
Company recorded net interest income of $309,000 related to the amounts payable
to or receivable from Seitel and its subsidiaries.
Prior to the Offering, the Company leased certain marine seismic equipment
to Horizon Exploration Limited, a marine seismic company wholly-owned by Energy
Research International, under a five-year operating rental agreement expiring
June 30, 2001. In connection with the Offering, the Company acquired all of the
outstanding stock of ERI. For the unaudited three and six month periods ended
June 30, 1997, the
9
<PAGE> 10
Company recognized revenue of $472,000 and $906,000 related to this lease.
Subsequent to the Offering, such rental income and expense was eliminated in the
Company's consolidated results of operations.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." This statement requires the reporting of
comprehensive income which includes net income plus all other non owner changes
in equity during the period. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company adopted this statement
during the quarter ended March 31, 1998. The Company does not believe the
adoption of this statement had a material effect on its consolidated financial
statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending December 31, 1998. The Company does not
believe the adoption of this statement will have a material effect on its
consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities", which requires costs of start-up activities and organization costs
to be expensed as incurred. The provisions of the statement are effective for
fiscal years beginning after December 15, 1998 and encourages early adoption.
Management adopted this statement in January 1998 and is currently evaluating
what effect this adoption will have on the Company's financial position and
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133) "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. Statement 133 is effective for
fiscal years beginning after June 15, 1999. The Company has not yet determined
the timing of and method of adoption for SFAS No. 133. However, the Company does
not believe the adoption of this statement will have a material impact on its
financial position and results of operations.
10
<PAGE> 11
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's revenues are generated from the sale of onshore and offshore
seismic data acquisition services and, commencing in March 1998, the sale of
seismic shot-hole drilling and front end services. The Company focuses its
onshore operations and front end services in logistically difficult wetland
environments along the U.S. Gulf Coast, and focuses its offshore operations
through Energy Research International (ERI) in congested areas in the North Sea
and the U.S. Gulf of Mexico. Onshore operations including front end services
accounted for approximately 65% and 69% of the Company's consolidated revenues
for the three and six months ended June 30, 1998, respectively, with offshore
operations accounting for the remaining 35% and 31% of consolidated revenues for
the three and six months ended June 30, 1998, respectively.
The Company generally provides its onshore seismic data acquisition
services under fixed fee contracts with its customers. The Company provides its
offshore seismic data acquisition services under either distance-or time-based
contracts (or a combination of both methods) or turnkey contracts that provide
for a fixed fee. The Company generally does not retain rights to the data
acquired. However, the Company anticipates that an increasing percentage of its
future offshore data acquisition projects will be multi-client surveys.
Conducting multi-client surveys normally has little effect on operating margins
in the short term because the Company will capitalize most of the costs relating
to the acquisition of the multi-client data that are not offset by pre-funding.
However, since revenues from multi-client projects only include pre-funding
amounts during the acquisition of the data, and these pre-funding amounts are
normally less than revenues for proprietary data acquisition projects, total
revenues and net income tend to be less during multi-client acquisition projects
than during proprietary acquisition projects. If the Company is able to make
sales of the multi-client data after full amortization of the acquisition cost
of the data (up to four years), the additional sales will result in revenues
with little or no cost, increasing net income. Conversely, if the sales of the
multi-client data are less than originally projected by management, the asset
value of the data will be adjusted to equal the estimated net realizable value
of the data (total estimated future sales less selling expenses), resulting in
decreased net income.
Because the Company derives a portion of its offshore revenues from sales
internationally, the Company is subject to risks relating to fluctuations in
currency exchange rates. The Company's costs and revenues from offshore
operations have historically been evenly divided between the U.S. dollar and the
British pound. The Company's financial statements are prepared using the U.S.
dollar as the functional currency, and, therefore, fluctuations in the exchange
rate between the U.S. dollar and the British pound affect the Company's costs
and revenues. Historically, fluctuations in exchange rates have not had a
material impact on the Company's results of operations, and the Company does not
currently engage in any currency hedging activities. As the Company expands its
operations into new geographic markets, such as Latin America, which may involve
more extensive currency risks, the Company intends to protect itself against
foreign currency fluctuations by generally attempting to match foreign currency
revenues and expenses in order to balance its net position of receivables and
payables denominated in foreign currencies, by endeavoring to require its
customers to pay for services in U.S. dollars and, to a lesser extent, by
purchasing foreign exchange contracts and other foreign exchange instruments to
counteract currency fluctuations.
The Company generally provides services to a relatively small group of key
customers that account for a significant percentage of the accounts receivable
of the Company at any given time. The Company's key customers vary over time,
but have historically included Seitel and its subsidiaries. The Company extends
credit to various companies in the oil and gas industry, including its key
customers, for the acquisition of seismic data, which results in a concentration
of credit risk. This concentration of credit risk may be affected by changes in
the economic or other conditions of the Company's key clients and may
accordingly impact the Company's overall credit risk. As of June 30, 1998, the
Company had one receivable from a customer of approximately $2.4 million that
was over one year old. In light of the age of this receivable, the Company has
increased its reserve for doubtful accounts to $450,000 as of June 30, 1998.
Historical credit losses incurred on receivables by the Company have been
immaterial.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following discussion of the results of operations is divided into a
discussion of the Company's onshore operations, which includes front end
services, and the Company's offshore operations. The discussions for the three
and six months ended June 30, 1997 are presented based on the unaudited proforma
revenues and expenses of the separate companies including periods prior to the
ERI Acquisition, which occurred contemporaneously with the IPO. The revenues of
the Company for the three and six months ended June 30, 1997 include
intercompany profits from work performed for Seitel, the Company's parent
corporation prior to the IPO, and its subsidiaries.
ONSHORE OPERATIONS
Quarter Ended June 30, 1998 Compared to June 30, 1997
Revenue increased 46% from $15.3 million in the second quarter of 1997 to
$22.4 million in the second quarter of 1998, primarily due to the Company's
fourth onshore crew, acquired at the end of the first quarter of 1998 and the
third onshore crew operating for the entire quarter of 1998, higher revenues
derived from the increased channel capacity of the Company's crews from 1,850
channels to 2,450 channels per crew, and revenue from the front end services
business acquired late in the first quarter of 1998.
Operating costs (excluding depreciation) increased 37% from $11.5 million
in the second quarter of 1997 to $15.8 million in the second quarter of 1998,
primarily due to the third onshore crew operating for the entire 1998 quarter,
the operations of the fourth onshore crew and the front end services business .
Operating margin percentage improved to 29.4% for the second quarter of 1998
compared to an operating margin of 24.9% for the 1997 quarter.
Depreciation and amortization increased 67% from $1.5 million in the second
quarter of 1997 to $2.5 million in the second quarter of 1998. This increase
resulted from operating four crews and the front end services business for the
entire quarter in 1998, including the depreciation associated with the upgrade
to 2,450 channels, in the 1998 period versus three crews at 1,850 channels in
the 1997 period.
Selling, general and administrative expenses increased 36% from $1.4
million in the second quarter of 1997 to $1.9 million in the second quarter of
1998, primarily due to the addition of administrative staff to support the
expanded operations and additional corporate staff and corporate office
expenses. Net interest expense increased from $(124,000) in the 1997 period to
$254,000 in the 1998 period due to borrowings from the Bank One Credit Facility
and the Fleet Term Loan.
Six Months Ended June 30, 1998 Compared to June 30, 1997
Revenue increased 44% from $27.9 million in the 1997 period to $40.3
million in the 1998 period, primarily due to the Company's third onshore crew
operating for the entire year-to-date period of 1998 as compared to only part of
the 1997 period, the fourth onshore crew, acquired at the end of the first
quarter of 1998 and operating for the entire second quarter of 1998, higher
revenues derived from the increased channel capacity of the Company's crews from
1,850 channels to 2,450 channels per crew, and revenue from the front end
services business acquired late in the first quarter of 1998.
Operating costs (excluding depreciation) increased 39% from $20.8 million
in the 1997 period to $28.9 million in the 1998 period, primarily due to the
third onshore crew operating for the entire 1998 period, and the operations of
the fourth onshore crew and the front end services business, both of which were
acquired at the end of the first quarter of 1998. Operating margin percentage
improved to 28.3% for the 1998 period compared to an operating margin of 25.4%
for the 1997 period.
Depreciation and amortization increased 57% from $2.8 million in the 1997
period to $4.4 million in the 1998 period. This increase resulted from operating
four crews and the front end services business in 1998, including the
depreciation associated with the upgrade to 2,450 channels in the 1998 period,
versus three crews at 1,850 channels in the 1997 period.
12
<PAGE> 13
Selling, general and administrative expenses increased 71% from $2.1
million in the 1997 period to $3.6 million in the 1998 period, primarily due to
the addition of administrative staff to support the expanded operations and
additional corporate staff and corporate office expenses. Net interest expense
increased from $-0- in the 1997 period to $175,000 in the 1998 period due to
borrowings from the Bank One Credit Facility and the Fleet Term Loan.
OFFSHORE OPERATIONS
Quarter Ended June 30, 1998 Compared to June 30, 1997
Revenue increased 3% from $11.6 million in the second quarter of 1997 to
$11.9 million in the second quarter of 1998, primarily due to increased vessel
utilization. The Company's vessel the Labrador Horizon completed its upgrade
from four to six streamers in the first quarter of 1998 and was operating during
the second quarter of 1998 with six streamers instead of four during the 1997
period. The vessels Discoverer and Celtic Horizon operated on a multi-client
project for the entire 1998 quarter, and the Pacific Horizon was fully utilized
in both the 1998 and 1997 quarters.
Operating expenses (excluding depreciation) decreased 21% from $8.5 million
in the second quarter of 1997 to $6.7 million in the second quarter of 1998 due
to the increased vessel efficiency. Operating margins improved to 43.7% for the
1998 compared as compared to 26.7% for the 1997 quarter.
Depreciation and amortization increased 35% from $1.7 million in the second
quarter of 1997 to $2.3 million in the second quarter of 1998, resulting from
the upgrade to six streamers to the Labrador Horizon and additional equipment
purchased for the Celtic Horizon in the 1998 quarter.
Selling, general and administrative expenses increased from $.7 million in
the second quarter of 1997 to $1.0 million in the second quarter of 1998 due to
increases in personnel required for the expansion of the Company's vessel fleet.
Net interest expense decreased from $272,000 in the second quarter of 1997 to
$41,000 in the second quarter of 1998 due to the retirement of certain debt and
capital leases with the proceeds of the IPO.
Six Months Ended June 30, 1998 Compared to June 30, 1997
Revenue decreased 19% from $22.2 million in the 1997 period to $18.0
million in the 1998 period, primarily due to the decrease in vessel availability
during the first quarter of 1998. The Company's vessel the Labrador Horizon was
in drydock for the entire first quarter of 1998 completing a $22 million
upgrade, the vessel Discoverer underwent a bi-annual maintenance inspection, and
the vessel Abshire Tide was decommissioned and replaced by the Celtic Horizon,
which required shipyard work prior to commencing service. Additionally, the
Discoverer, the Abshire Tide, and later the Celtic Horizon, were working during
the 1998 period acquiring multi-client data, which instead of generating current
revenue, will generate revenue in the future as data is licensed to customers.
During the 1997 period, the Discoverer and the Abshire Tide acquired data on a
contract basis resulting in higher revenues during the period.
Operating expenses (excluding depreciation) decreased 27% from $15.3
million in the 1997 period to $11.1 million in the 1998 period due to the
decrease in vessel utilization during the first quarter of 1998. Operating
margins improved to 38.3% for the 1998 period as compared to 31.1% for the 1997
period.
Depreciation and amortization decreased 6% from $3.5 million in the 1997
period to $3.3 million in the 1998 period, resulting from the decrease in vessel
utilization during the first quarter of 1998 partially offset by additional
depreciation during the second quarter of 1998 from the upgrade to six streamers
on the Labrador Horizon and additional equipment purchased for the Celtic
Horizon.
Selling, general and administrative expenses increased from $1.3 million in
the 1997 period to $1.8 million in the 1998 period due to increases in personnel
required for the expansion of the Company's vessel fleet. Net interest expense
decreased from $297,000 in the 1997 period to $86,000 in the 1998 period due to
the retirement of certain debt and capital leases from the proceeds of the IPO.
13
<PAGE> 14
LIQUIDITY
The Company had a working capital deficit of $9.0 million as of June 30,
1998. The indebtedness of the Company as of such date consisted of borrowings
from the Revolving Credit Facility, the Short-Term Loan, the Fleet Capital Term
Loan, and a capital lease obligation with British Linen Bank, totaling
approximately $59.6 million.
On July 20, 1998, the Company completed an offering of $100 million of
10 3/4% Senior Notes due 2008 in a private placement transaction which resulted
in net proceeds to the Company of approximately $96.4 million after deducting
offering-related expenses (the Offering). The proceeds of the Offering were used
to repay $27.5 million of borrowings outstanding on the Revolving Credit
Facility and the Short-Term Loan, with the remaining proceeds to be used to
complete the upgrades for the vessels Austral Horizon and Atlantic Horizon and
for general corporate purposes.
The Company has expanded its existing data acquisition capabilities by
increasing the streamer towing capacity of its vessel the Labrador Horizon. The
upgrades to this vessel were initiated late in the fourth quarter of 1997 and
were completed at the end of the first quarter of 1998. The capital cost of
these upgrades was approximately $22.0 million.
In April 1998, the Company entered into an agreement with British Linen
Bank for the financing of the Labrador Horizon upgrade and the refinancing of
the existing capital lease of this vessel. As part of this financing, British
Linen Bank purchased the vessel from the previous owner, funded approximately
$20.0 million of the upgrades to the vessel, and entered into a capital lease of
the vessel to the Company for a five-year term commencing upon completion of the
upgrades, for a total commitment of approximately $31.3 million. The facility
bears interest at a rate of LIBOR plus 1.375% and required the Company to post a
security deposit of approximately $5 million with scheduled amounts to be
refunded based upon a predetermined formula. Additionally, the Company has the
option to acquire the vessel at the end of the term of the capital lease for a
price of 0.1% of the total facility commitment.
The Company is currently upgrading and equipping two additional offshore
seismic vessels at an aggregate capital cost of approximately $98.8 million. The
Company acquired the two vessels, the Austral Horizon and the Atlantic Horizon,
during the fourth quarter of 1997 for purchase prices of approximately $1.6
million and $3.6 million, respectively. These acquisitions were funded with cash
flows from operations. The Company expects to complete the upgrade and
outfitting of the vessels during the third and fourth quarters of 1998. The
costs to outfit and equip the two vessels will be approximately $34.3 million
for the Austral Horizon and approximately $59.3 million for the Atlantic
Horizon. As of August 1, 1998 the Company had expended $50.6 million (including
acquisition costs) and had $39.4 million of capital commitments outstanding
related to these projects. The Company funded these capital costs on an interim
basis with borrowings from the Revolving Credit Facility and the Short-Term
Loan. These borrowings were repaid on July 20, 1998 with proceeds from the
Offering and the remaining upgrade costs will be paid from the remaining
proceeds of the Offering.
In September 1997, the Company ordered a fourth Opseis seismic data
acquisition system at an estimated total cost of approximately $5.9 million as
part of the Company's addition of a fourth crew at a total cost of $8.6 million.
In April 1998, the Company entered into a term loan commitment with Fleet
Capital Corporation for the financing of this Opseis system at a fixed rate of
7.36%. Monthly payments of approximately $117,000 will be made under the loan
with the Opseis system pledged as security for the loan.
The Company has an agreement with Bank One, Texas, N.A. with respect to a
$20.0 million revolving credit facility secured by the Company's accounts
receivable. The amount the Company may borrow under the revolving credit
facility is limited to a borrowing base that is equal to 90% of eligible U.S.
and U.K. investment grade accounts receivable, 100% of receivables secured by
acceptable letters of credit and 80% of non-graded U.S. or foreign receivables
and other eligible receivables approved by the bank. Interest only is payable
monthly or at the end of LIBOR interest periods, and the credit facility is
payable in full on June 1, 1999. Mandatory prepayments are required if
borrowings exceed the borrowing base. Interest accrues under the credit facility
at the bank's base rate or at LIBOR plus a spread of 1.375% if the Company's
debt to net
14
<PAGE> 15
worth ratio is less than 1 to 1 and 1.625% if such ratio is equal to or greater
than 1 to 1. As of June 30, 1998, $20.0 million was available for borrowing
under the facility and $20.0 million of borrowings were outstanding. On July 20,
1998, the $20 million of borrowings outstanding was repaid with proceeds from
the Offering.
In March 1998, the Company acquired the common stock of a privately-held
company providing seismic shot-hole drilling and front-end services, for a price
of approximately $6.3 million consisting of approximately $4.3 million in cash
and 98,360 shares of the Company's common stock and deferred compensation
payable to the former owner of $500,000. The Company financed the cash portion
of the acquisition with a combination of cash flows from operations and
borrowings from the Company's revolving credit facility.
The Company believes that its planned capital expenditures and operating
requirements through the end of 1998 will be funded from the proceeds of the
Offering, the Bank One Revolving Credit facility, and the Company's cash flow
from operations. The Company anticipates that its cash flow from operations will
be sufficient to fund its operating requirements for the foreseeable future, and
that any additional capital expenditures will be funded from the Company's cash
flow from operations and additional debt or equity financing. If the Company is
not able to obtain additional financing, it will be unable to make such capital
expenditures and the Company's financial position and results of operations may
be materially and adversely affected as a result.
YEAR 2000
The Company is currently in the process of evaluating its computer software
programs and operating systems to ensure such programs and systems will be able
to process transactions in the year 2000. However, the Company does not expect
that costs incurred to modify its programs and systems will have a material
adverse effect on its financial condition or results of operations.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, changes in the exploration budgets of the Company's
seismic data and related services customers, actual customer demand for the
Company's seismic acquisition services, and the timing and extent of changes in
commodity prices for natural gas, crude oil and condensate and natural gas
liquids and conditions in the capital markets and equity markets during the
periods covered by the forward looking statements.
15
<PAGE> 16
PART II -- OTHER INFORMATION
ITEMS 1-3 -- NOT APPLICABLE
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on April 28, 1998.
Matters voted upon at the Annual Meeting, and the results of the votes, are as
follows:
1. The election of six directors to serve until the 1999 Annual Meeting.
<TABLE>
<CAPTION>
NO. OF NO. OF
NAME VOTES FOR VOTES WITHHELD
- ---- --------- --------------
<S> <C> <C>
William L. Lurie.................................... 7,400,965 14,585
Jay N. Silverman.................................... 7,400,865 14,685
Gerald M. Harrison.................................. 7,401,365 14,185
George Purdie....................................... 7,400,965 14,585
Paul A. Frame....................................... 7,399,965 15,585
Paul G. Somerville.................................. 7,400,865 14,685
</TABLE>
2. To approve the Eagle Geophysical, Inc. 1997 Stock Option Plan.
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
VOTES FOR VOTES AGAINST VOTES ABSTAINING
- --------- ------------- ----------------
<S> <C> <C>
3,347,356 1,298,431 29,933
</TABLE>
3. To approve the performance-based compensation payable to Mr. Jay N.
Silverman, President and CEO of the Company, under the Employment
Agreement between the Company and Mr. Silverman.
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
VOTES FOR VOTES AGAINST VOTES ABSTAINING
- --------- ------------- ----------------
<S> <C> <C>
7,285,536 92,721 37,293
</TABLE>
4. To approve the performance-based compensation payable to Mr. Paul Frame,
director of the Company, under the Bonus Agreement between the Company
and Mr. Frame.
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
VOTES FOR VOTES AGAINST VOTES ABSTAINING
- --------- ------------- ----------------
<S> <C> <C>
7,285,536 92,721 37,293
</TABLE>
5. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ended December
31, 1998.
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
VOTES FOR VOTES AGAINST VOTES ABSTAINING
- --------- ------------- ----------------
<S> <C> <C>
7,397,017 6,100 12,433
</TABLE>
ITEM 5 -- NOT APPLICABLE
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
10.1 -- Agreement for the Sale and Purchase of m.v. Labrador
Horizon dated April 1, 1998 among Royal Bank of Scotland
(Industrial Leasing) Limited, British Linen Shipping
Limited and Horizon Exploration Limited
10.2 -- Hire Purchase Agreement for m.v. Labrador Horizon dated
April 1, 1998 among British Linen Shipping Limited,
Horizon Exploration Limited and Eagle Geophysical
Offshore, Inc.
</TABLE>
16
<PAGE> 17
<TABLE>
<C> <S>
10.3 -- Corporate Guarantee dated April 1, 1998 among Eagle
Geophysical, Inc. ("Eagle"), Energy Research
International and British Linen Shipping Limited
10.4 -- First Amendment to Loan Agreement dated October 21, 1997
among Bank One, Texas, N.A. ("Bank One"), Eagle and
certain subsidiaries of Eagle dated June 10, 1998)
10.5 -- Amended and Restated Revolving Note dated June 10, 1998
10.6 -- First Amendment to Loan Agreement dated October 21, 1997
between Bank One and Horizon Exploration Limited dated
June 10, 1998
10.7 -- Credit Agreement -- $29,000,000 Unsecured Advancing Line
of Credit between Bank One and Eagle dated June 5, 1998
10.8 -- Advancing Note dated June 5, 1998
10.9 -- Form of Guarantee Agreement entered into between Bank One
and each of Eagle Geophysical Onshore, Inc., Eagle
Geophysical Offshore, Inc., Eagle Geophysical de Mexico,
Inc. Eagle Geophysical GOM, Inc., Eagle Geophysical
Management, Inc. and Eagle Front End Services, Ltd. dated
June 5, 1998
10.10 -- Master Security Agreement dated January 28, 1998 between
Fleet Capital Corporation ("Fleet") and Eagle Geophysical
Onshore, Inc. ("Eagle Onshore")
10.11 -- Equipment Security Agreement dated February 11, 1998
between Fleet and Eagle Onshore
10.12 -- Promissory Note dated April 30, 1998 payable to Fleet by
Eagle Onshore
10.13 -- Guaranty dated January 28, 1998 between Fleet and Eagle
27 -- Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
There was one Current Report on Form 8-K filed during the three months
ended June 30, 1998. A Current Report on Form 8-K dated June 29, 1998 was filed
June 30, 1998 disclosing that the Company announced an unregistered $100,000,000
debt offering.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE GEOPHYSICAL, INC.
<TABLE>
<C> <S> <C>
/s/ JAY N. SILVERMAN President August 14, 1998
- -----------------------------------------------------
Jay N. Silverman
/s/ RICHARD W. MCNAIRY Chief Financial Officer August 14, 1998
- -----------------------------------------------------
Richard W. McNairy
/s/ DAVID H. SAINDON Chief Accounting Officer August 14, 1998
- -----------------------------------------------------
David H. Saindon
</TABLE>
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1 -- Agreement for the Sale and Purchase of m.v. Labrador
Horizon dated April 1, 1998 among Royal Bank of Scotland
(Industrial Leasing) Limited, British Linen Shipping
Limited and Horizon Exploration Limited
10.2 -- Hire Purchase Agreement for m.v. Labrador Horizon dated
April 1, 1998 among British Linen Shipping Limited,
Horizon Exploration Limited and Eagle Geophysical
Offshore, Inc.
10.3 -- Corporate Guarantee dated April 1, 1998 among Eagle
Geophysical, Inc. ("Eagle"), Energy Research
International and British Linen Shipping Limited
10.4 -- First Amendment to Loan Agreement dated October 21, 1997
among Bank One, Texas, N.A. ("Bank One"), Eagle and
certain subsidiaries of Eagle dated June 10, 1998)
10.5 -- Amended and Restated Revolving Note dated June 10, 1998
10.6 -- First Amendment to Loan Agreement dated October 21, 1997
between Bank One and Horizon Exploration Limited dated
June 10, 1998
10.7 -- Credit Agreement -- $29,000,000 Unsecured Advancing Line
of Credit between Bank One and Eagle dated June 5, 1998
10.8 -- Advancing Note dated June 5, 1998
10.9 -- Form of Guarantee Agreement entered into between Bank One
and each of Eagle Geophysical Onshore, Inc., Eagle
Geophysical Offshore, Inc., Eagle Geophysical de Mexico,
Inc. Eagle Geophysical GOM, Inc., Eagle Geophysical
Management, Inc. and Eagle Front End Services, Ltd. dated
June 5, 1998
10.10 -- Master Security Agreement dated January 28, 1998 between
Fleet Capital Corporation ("Fleet") and Eagle Geophysical
Onshore, Inc. ("Eagle Onshore")
10.11 -- Equipment Security Agreement dated February 11, 1998
between Fleet and Eagle Onshore
10.12 -- Promissory Note dated April 30, 1998 payable to Fleet by
Eagle Onshore
10.13 -- Guaranty dated January 28, 1998 between Fleet and Eagle
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
Private & Confidential
DATED 30 MARCH 19
--------------------------------------
ROYAL BANK OF SCOTLAND
(INDUSTRIAL LEASING) LIMITED (1)
AND
BRITISH LINEN SHIPPING LIMITED (2)
AND
HORIZON EXPLORATION LIMITED (3)
--------------------------------------
AGREEMENT
FOR SALE AND PURCHASE OF
M.V. "LABRADOR HORIZON"
--------------------------------------
NORTON ROSE
London
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C> <C>
1 Definitions...................................................................................1
2 Sale and purchase of the Vessel...............................................................3
3 Documentation.................................................................................3
4 Payment.......................................................................................4
5 Encumbrances and taxes........................................................................5
6 Spares and bunkers............................................................................5
7 Condition of Vessel on delivery...............................................................6
8 Delivery......................................................................................6
9 Extent of liability of Seller................................................................6
10 Liability for Charterparty and Sub-Charter....................................................7
11 Counterparts..................................................................................7
12 Law and submission to jurisdiction............................................................7
13 Notices.......................................................................................7
</TABLE>
<PAGE> 3
THIS AGREEMENT is dated 30 March 1998 and made BETWEEN:
(1) ROYAL BANK OF SCOTLAND (INDUSTRIAL LEASING) LIMITED a company
incorporated in England whose registered office is situate at 42, St
Andrew Square, Edinburgh, EH2 2YE (the "SELLER");
(2) BRITISH LINEN SHIPPING LIMITED a company incorporated in Scotland whose
registered office is situate at 4 Melville Street, Edinburgh, EH3 7NS
(the "PURCHASER");
(3) HORIZON EXPLORATION LIMITED a company incorporated in England whose
registered office is situate at Horizon House, 1 Suffolk Way, Kent TN13
1YL (the "Horizon").
WHEREAS:
(A) the Seller is the registered owner of the m.v. "LABRADOR HORIZON" (the
"Vessel"), registered under Bahamian flag in the Bahamian Register of
Ships under Official Number 715224;
(B) pursuant to a charterparty by demise dated 20 December 1990 between the
Seller and Simon-Horizon Limited ("SHL") the Seller charters the Vessel
to SHL by way of demise, on the terms and conditions therein set forth
(the "Charterparty"); and
(C) pursuant to a time charter dated 15 July 1994 between SHL and Horizon,
SHL charters the Vessel to Horizon on the terms and conditions therein
set forth (the "Sub-Charter");
(D) SHL and the Seller have agreed to terminate the chartering of the
Vessel pursuant to the Charterparty and SHL and Horizon have agreed to
terminate the chartering of the Vessel pursuant to the Sub-Charter
upon, and for purposes of, the sale of the Vessel to the Purchaser; and
(E) the Seller has agreed to sell to the Purchaser and the Purchaser has
agreed to purchase sixty-four shares of one sixty-fourth each in the
Vessel on and subject to the terms and conditions contained in this
Agreement.
BY WHICH IT IS AGREED as follows:
1 DEFINITIONS
In this Agreement, unless the context otherwise requires:
"BUSINESS DAY" means a day on which banks are open for the transaction
of business of the nature concerned in London;
"CANCELLING DATE" means 7 April 1998 or such later date as may be
agreed in writing between the parties in accordance with clause 2.2
hereof;
"COMPULSORY ACQUISITION" means requisition for title or other
compulsory acquisition, requisition, appropriation, expropriation,
deprivation, forfeiture or
1
<PAGE> 4
confiscation for any reason of the Vessel by any Government Entity or
other competent authority, whether de jure or de facto, but shall
exclude requisition for use or hire not involving requisition of title;
"DELIVERY" means delivery of the Vessel to the Purchaser in accordance
with clause 8.1 on completion of its purchase under this Agreement;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, security interest, title
retention or other encumbrance securing or any right conferring a
priority of payment in respect of, any obligation of any person;
"GOVERNMENT ENTITY" means and includes (whether having a distinct legal
personality or not) any national or local government authority, board,
commission, department, division, organ, instrumentality, court or
agency and any association, organisation or institution of which any of
the foregoing is a member or to whose jurisdiction any of the foregoing
is subject or in whose activities any of the foregoing is a
participant;
"TOTAL LOSS" means:
1.1 actual or constructive or compromised or arranged total loss of
the Vessel; or
1.2 the Compulsory Acquisition of the Vessel; or
1.3 the hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Vessel (other than where the
same amounts to Compulsory Acquisition of the Vessel) by any
Government Entity, or by persons acting or purporting to act on
behalf of any Government Entity, unless the Vessel be released
and restored to the relevant operator from such hijacking, theft,
condemnation, capture, seizure, arrest, detention prior to the
Cancelling Date.
For the purpose of this Agreement, a Total Loss shall be deemed to have
occurred:
1.1 in the case of an actual loss of the Vessel on the actual date
and at the time the Vessel was lost or, if such date is not
known, on the date on which the Vessel was last reported;
1.2 in the case of a constructive total loss of the Vessel, upon the
date and at the time of the notice of abandonment of the Vessel,
is given to the insurers of the Vessel for the time being
(provided a claim for total loss is admitted by such insurers)
or, if such insurers do not forthwith admit such a claim, at the
date and at the time at which either a total loss is subsequently
admitted by the insurers or a total loss is subsequently adjudged
by a competent court of law or arbitration to have occurred;
1.3 in the case of a compromised or arranged total loss, on the date
upon which a binding agreement as to such comprised or arranged
total loss has been entered into by the insurers of the Vessel;
2
<PAGE> 5
1.4 in the case of Compulsory Acquisition, on the date upon which the
relevant requisition of title or other compulsory acquisition
occurs.
2 SALE AND PURCHASE OF THE VESSEL
2.1 The Seller shall sell sixty-four shares of one sixty-fourth each in the
Vessel to the Purchaser and the Purchaser shall purchase sixty-four
shares of one sixty-fourth each in the Vessel together with such of the
outfit and spare gear belonging to the Vessel both on board and on
shore as may belong to the Seller subject to the terms hereinafter
appearing provided however that the Purchaser shall not be obliged to
complete the purchase of the Vessel if Delivery of the Vessel by the
Seller and Horizon to the Purchaser does not occur on or before the
Cancelling Date.
2.2 If the Vessel is not ready to be delivered by the Cancelling Date then
the Purchaser has the right, on or prior to the Cancelling Date, either
to cancel this Agreement or to extend the Cancelling Date and if the
Purchaser elects to extend the Cancelling Date then it shall send a
written notice to this effect to the Seller, and Horizon and, provided
that prior to the original Cancelling Date the parties mutually agree a
new Cancelling Date, this Agreement shall remain in full force and
effect on the same terms and conditions herein appearing save in
respect of the revised Cancelling Date.
2.3 The Seller shall sell to the Purchaser its sixty-four shares of one
sixty-fourth each in the Vessel for an amount of sixteen million United
States Dollars (US$16,000,000) or its equivalent in Pounds Sterling
exclusive of Value Added Tax (hereinafter referred to as the "Purchase
Price").
2.4 If prior to Delivery of the Vessel by the Seller and Horizon to, and
acceptance by the Purchaser hereunder, the Vessel should become a Total
Loss this Agreement shall be null and void.
3 DOCUMENTATION
3.1 On Delivery, and in exchange for the Purchase Price paid in accordance
with clause 4, the Seller shall deliver to the Purchaser a duly
executed Bill of Sale in the form set out in Schedule 1 (the "Bill of
Sale") in respect of all the shares in the Vessel to be transferred to
the Purchaser free from all Encumbrances created by the Seller by its
own acts.
3.2 In addition to the document referred to in clause 3.1, the Seller
and/or Horizon as the case may be, shall provide the Purchaser with the
following documents in a form and substance satisfactory to the
Purchaser before or on Delivery of the Vessel to the Purchaser:
(a) copies of minutes of a board meeting of the Seller approving the
termination of the Charterparty, the sale of the Vessel to the
Purchaser, authorising the execution of a Bill of Sale in respect
of the Vessel and where relevant, any powers of attorney issued
pursuant to such meeting and letters from Horizon to the insurers
of the Vessel notifying them of the sale of the Vessel to the
Purchaser;
3
<PAGE> 6
(b) copies of minutes of a board meeting of Horizon approving the
termination of the Sub-Charter, and where relevant any powers of
attorney issued pursuant to such meeting;
(c) an original letter procured by Horizon from the owner of the
Cammell Laird Shipyard in Birkenhead (the "Shipyard") confirming
the release of any lien the Shipyard may have on the Vessel and
confirming that any spare parts in the Shipyard belonging to the
Vessel and the Seller have been clearly identified.;
(d) a certified copy of the Deed of Termination and Novation dated
1998, between inter alia the Seller, SHL and
Horizon for, inter alia the termination of the Charterparty and
the Sub-Charter (the "TERMINATION AGREEMENT").
3.3 The Purchaser shall also deliver to the Seller on or before Delivery of
the Vessel to the Purchaser in terms hereof copies of extracts of
minutes of a board meeting of the Purchaser approving the purchase of
the Vessel and where relevant, any powers of attorney issued pursuant
to such meeting.
3.4 The Purchaser shall not be obliged to complete the purchase of the
Vessel in terms of this Agreement unless and until Horizon has become
obliged to accept the Vessel as hirer in terms of the Hire Purchase
Agreement entered into in respect of the Vessel between the Purchaser
as Owner, Horizon as Hirer and Eagle Geophysical Offshore Inc as Surety
dated 1998 (the "HIRE PURCHASE AGREEMENT") and unless all of the
conditions precedent to the obligations of the Purchaser to deliver the
Vessel under the Hire Purchase Agreement have been fulfilled.
4 PAYMENT
4.1 The Purchase Price shall be paid to the Seller on Delivery, [but not
later than three Business Days] after the Vessel is ready for Delivery
and written notice thereof has been given to the Purchaser by Horizon
(unless the Purchaser agrees that such notice need not be given), in
Sterling in immediately available cleared Sterling funds and free of
bank charges, set off or other deduction to the bank account of the
Seller at The Royal Bank of Scotland plc, The Promenade, Cheltenham,
Gloucestershire, GL50 1PY, Sort Code: 16-16-13, Account No: 12176088.
For the avoidance of doubt, it is agreed that the Vessel shall not be
ready for Delivery if the Charterparty and the Sub-Charter have not
been terminated in accordance with the Termination Agreement.
4.2 All payments to be made to the Seller hereunder shall be made in full
without any set-off or counterclaim whatsoever and free and clear of
all deductions or withholdings whatsoever.
4
<PAGE> 7
5 ENCUMBRANCES AND TAXES
5.1 The Seller hereby warrants to the Purchaser in respect of the shares in
the Vessel to be sold to the Purchaser, that such shares will, at
Delivery, be free from all Encumbrances created by the Seller by its
own acts. It is hereby agreed that the words "free from encumbrances
appearing in the Registry of the said Ship" appearing in the Bill of
Sale in respect of the Vessel shall be deemed to refer to the Vessel
being free from Encumbrances created by the Seller by its own acts.
5.2 The Seller and Horizon hereby confirm to the Purchaser that immediately
prior to Delivery and the acceptance by the Purchaser of the Vessel
pursuant to this Agreement the Charterparty and the Sub-Charter will
have been terminated and that Horizon will remain in possession of the
Vessel as bailee of the Seller. The Seller will instruct Horizon as its
bailee to deliver the Vessel to the Purchaser in accordance with this
Agreement or to deliver the Vessel as may be required by the Purchaser.
5.3 Horizon represents and warrants to the Purchaser that on Delivery to
the Purchaser hereunder, the Vessel will be free from all Encumbrances
and maritime liens and any other debts whatsoever. Should any claims
which have been incurred by SHL or Horizon prior to the time of
Delivery of the Vessel be made against the Vessel Horizon hereby
undertakes to indemnify the Purchaser on demand against all
consequences of such claims.
5.4 The Seller shall not be liable for any costs or expenses whatsoever and
howsoever incurred in relation to the sale of the Vessel and the
Seller's shares in the Vessel. Any taxes, fees and expenses connected
with the purchase and the registration of the Bill of Sale and/or the
Vessel shall be paid by Horizon.
6 SPARES AND BUNKERS
6.1 It is acknowledged by the parties hereto, that no additional payment is
required to be made by the Purchaser to the Seller in respect of any
remaining unused stores and unbroached lubricating oils and bunkers on
board the Vessel at the time of Delivery thereof to the Purchaser.
6.2 All spare parts and spare equipment including the spare tail-end
shaft(s) and/or the spare propeller(s), propeller blade(s), if any,
belonging to the Vessel at the time of Delivery, used or unused,
whether on board the Vessel or not which belong to the Seller shall
become the property of the Purchaser. Forwarding charges, if any, shall
be for the account of Horizon. It is hereby agreed that the Seller and
Horizon are not required to replace any spare parts which are taken out
of spare and used as replacements prior to Delivery, but the replaced
items shall after Delivery become the property of the Purchaser.
6.3 Personal belongings of the master, officers and crew including master's
slop chest shall be excluded from the sale, as shall personal effects
belonging to the master, officers and crew. Title to all equipment on
the Vessel which belong to the Seller shall pass from the Seller to the
Purchaser at the same time as the transfer of the shares in the Vessel
by the Seller to the Purchaser pursuant to clause 8.
5
<PAGE> 8
7 CONDITION OF VESSEL ON DELIVERY
7.1 As between the Seller and the Purchaser the Vessel, with everything
belonging to the Vessel, shall be at the Seller`s risk and expense up
to Delivery. Subject to the other provisions of this Agreement, and in
particular clause 9.2, the Vessel shall be sold and purchased "as is",
without inspection and in its then physical condition.
8 DELIVERY
8.1 The Seller shall deliver or cause Horizon as bailee of the Vessel to
deliver the Vessel wherever the Vessel may be at the time of Delivery
(whether in port or at sea). Delivery of the Vessel shall take place on
or before the Cancelling Date and shall be conclusively evidenced by
the execution of a protocol of delivery and acceptance signed by the
Seller, Horizon and the Purchaser.
8.2 Horizon shall procure that the Vessel is tendered for Delivery and the
Purchaser shall take over the Vessel, as is at the time of Delivery.
8.3 The obligation of the Seller to deliver the Vessel to the Purchaser is
subject to the condition that on or before Delivery the following
conditions have been fulfilled to the reasonable satisfaction of the
Seller:
(a) the Purchaser shall have paid the Purchase Price to the Seller in
accordance with clause 4.1;
(b) Horizon and SHL shall have performed all of their obligations
under the Charterparty, and the Sub-Charter and the Termination
Agreement arising on or prior to the time of Delivery;
(c) the Seller shall have received the documents referred to in
clause 3.3 of this Agreement.
9 EXTENT OF LIABILITY OF SELLER
9.1 The Seller hereby represents and warrants to the Purchaser in respect
of the shares in the Vessel to be sold to the Purchaser, that it has
and shall convey to the Purchaser such title as it may hold to such
shares in the Vessel as are registered in its name in the Bahamian
Register of Ships immediately prior to Delivery.
9.2 Subject to clauses 5.1 and 9.1 hereof, the Seller makes no other
warranty or representation to the Purchaser in relation to the Vessel
or the Seller's shares in the Vessel, and the Purchaser expressly
agrees and acknowledges that no other warranty or representation of any
kind is, or has been, given by or on behalf of the Seller in respect of
the Vessel or the Seller's shares in the Vessel and, accordingly, the
Purchaser confirms that it has not, in entering into this Agreement,
and with the exception of the warranties referred to in clauses 5.1 and
9.1 hereof, relied on any warranty or representation by the Seller,
express or implied, whether arising by law or otherwise, in relation to
the Vessel or the Seller's shares in the Vessel, including, without
limitation, warranties or representations as to the description,
merchantable quality, fitness for purpose,
6
<PAGE> 9
the state or quality of the Vessel and the benefit of any such warranty
or representation by the Seller is hereby irrevocably and
unconditionally waived.
10 LIABILITY FOR CHARTERPARTY AND SUB-CHARTER
10.1 The Purchaser shall not be liable for any liabilities, obligations,
claims and demands whatsoever arising or concerning the Charterparty
and the Sub-Charter and in respect of anything done or omitted to be
done under or in connection therewith, whether arising before or after
the Delivery of the Vessel and Horizon indemnifies and holds the
Purchaser harmless on demand against any such liabilities, obligations,
claims and demands, and any losses, damages, costs or expenses incurred
by the Purchaser in connection therewith.
11 COUNTERPARTS
11.1 This Agreement may be entered into in the form of three counterparts,
each executed by one of the parties, and, provided each party shall so
execute this Agreement, each of the executed counterparts, when duly
exchanged, shall be deemed to be an original but, taken together, they
shall constitute one instrument.
12 LAW AND SUBMISSION TO JURISDICTION
12.1 This Agreement shall be governed by and construed and performance
hereof shall be determined in accordance with the laws of England.
13 NOTICES
13.1 Except as otherwise provided herein, each notice, request, demand or
other communication or document to be given or made hereunder shall be
given in writing but unless otherwise stated, may be made by
telefax/facsimile transmission.
13.2 Any notice, demand or other communication to be made or delivered by
any party to this Agreement pursuant to this Agreement shall be sent
to:
(i) to the Seller at:
Royal Bank of Scotland (Industrial Leasing) Limited
42, St. Andrew Square
Edinburgh EH2 2YE
Scotland
Attention: Phillip Cheeseman
Facsimile: 01242 222 743
7
<PAGE> 10
(ii) to the Purchaser at:
British Linen Shipping Limited
4 Melville Street
Edinburgh EH3 7NS
Scotland
Attention: Managing Director/The Company Secretary
Facsimile: 0131 243 8423
(iii) to the Sub-Charterer at:
Horizon Exploration Limited
Horizon House
1 Suffolk Way
Kent TN13 1YL
England
Attention: Neil Campbell
Facsimile: 01732 742 977
13.3 Each such notice, demand, request or other communication shall be
deemed to have been made or delivered when:
(a) (in the case of telefax/facsimile) when a materially complete and
legible copy of the communication has been received by the
addressee (unless the date of despatch is outside normal business
hours in the country of the addressee, in which case such
telefax/facsimile transmission shall be deemed to have been
received at the opening of business on the next such business
day); or
(b) (in the case of any letter) when delivered to the addressee's
address as specified in or notified pursuant to clause 13.2 or,
if sent by post, five (5) days after being deposited in the post
first class postage prepaid in an envelope addressed to the
addressee at that address.
13.4 Any process with respect to this Agreement may be commenced in
accordance with the foregoing provisions of this clause or by any other
means permitted by law.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first above written.
8
<PAGE> 11
SIGNED by Phillip Cheesemann the duly )
authorised Attorney of ROYAL BANK OF )
SCOTLAND (INDUSTRIAL LEASING) )
LIMITED pursuant to a power of attorney ) /s/ P. CHEESEMANN
dated 30 March 1998 in the presence )
of: ) Attorney-in-Fact
/s/ J. LEGGETT
- ---------------------------------------
Witness
Name: J. Leggett
Address: Cameron McKenna EC1A
Occupation: Solicitor
Signed by John N. Coppard the duly )
authorised Attorney of BRITISH LINEN )
SHIPPING LIMITED pursuant to a power ) /s/ JOHN COPPARD
of attorney dated 30 March 1998 in the )
presence of: ) Attorney-in-Fact
/s/ G. HALL
- ---------------------------------------
Witness
Name: G. Hall
Address: Norton Rose, London
Occupation: Solicitor
SIGNED by )
HORIZON EXPLORATION LIMITED ) /s/ NEIL A.M. CAMPBELL
by Neil A.M. Campbell ) ----------------------
9
<PAGE> 1
EXHIBIT 10.2
DATED 30 MARCH 1998
-----------------------------------------
BRITISH LINEN SHIPPING LIMITED (1)
AND
HORIZON EXPLORATION LIMITED (2)
AND
EAGLE GEOPHYSICAL OFFSHORE INC. (3)
------------------------------
HIRE PURCHASE AGREEMENT
IN RESPECT OF M.V. "LABRADOR HORIZON"
------------------------------
NORTON ROSE
London
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C> <C>
1 Purpose and Definitions.......................................................................1
2 The Acquisition, Upgrade Works and Supply Contracts..........................................10
3 Hirer's Representations and Warranties.......................................................12
4 Term of Agreement............................................................................17
5 Conditions...................................................................................17
6 Delivery and Acceptance......................................................................18
7 Extent of Owner's Liability; Third Party Warranties..........................................18
8 Hire Payments................................................................................19
9 Payments, Interest and Calculations..........................................................20
10 Costs and Indemnities........................................................................21
11 Surety.......................................................................................24
12 Taxation.....................................................................................25
13 General Undertakings.........................................................................28
14 Sub Chartering...............................................................................33
15 Use and Trade of the Ship....................................................................34
16 Title, Registration, Name and House Flag.....................................................36
17 Maintenance and Operation....................................................................36
18 Insurance Undertakings; Wreck Removal........................................................41
19 Powers of Owner to Remedy Defaults...........................................................46
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
20 Consumable Stores............................................................................47
21 Use of Equipment and Replacement.............................................................47
22 Mortgages....................................................................................48
23 Loss and Damage..............................................................................48
24 Salvage......................................................................................51
25 Requisition for Hire.........................................................................52
26 Termination Events...........................................................................53
27 Owner's Rights Following a Termination Event.................................................55
28 Notices......................................................................................56
29 Liens and Indemnities........................................................................57
30 Assignment and Sale of Ship..................................................................59
31 Transfer of Ownership........................................................................59
32 Increased Costs, Funding Problems and Illegality.............................................61
33 Miscellaneous................................................................................62
34 Law and Jurisdiction.........................................................................64
SCHEDULE
1 List of Documents and Evidence...............................................................65
2 Forms of Loss Payable Clauses................................................................68
3 Form of Hirer's Assignment...................................................................69
4 Form of Corporate Guarantee..................................................................70
5 Form of Notice of Assignment.................................................................71
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6 Equipment....................................................................................73
7 Form of Account Assignment...................................................................74
8 Excluded Equipment...........................................................................75
9 Capital Schedule.............................................................................76
</TABLE>
<PAGE> 5
THIS HIRE PURCHASE AGREEMENT dated 30 March, 1998 and made
BETWEEN:
(1) BRITISH LINEN SHIPPING LIMITED a company incorporated in Scotland whose
registered office is situate at 4 Melville Street, Edinburgh EH3 7NS
with Value Added Tax Registration Number 345166163 (the "OWNER");
(2) HORIZON EXPLORATION LIMITED a company incorporated in England whose
registered office is situate at Horizon House, 1 Suffolk Way,
Sevenoaks, Kent, TN13 1YL (the "HIRER"); and
(3) EAGLE GEOPHYSICAL OFFSHORE INC. a company incorporated in the state of
Delaware, United States of America whose principal place of business is
situate at 50 Briar Hollow West, 6th Floor, Houston, Texas 77027 (the
"SURETY").
WHEREAS
(A) the Owner has agreed to purchase the Vessel in terms of the Sale and
Purchase Agreement;
(B) the Vessel is undergoing upgrade work at Cammell Laird Shipyard in
Birkenhead under the terms of the Upgrade Contract;
(C) the Equipment has been commissioned and is being installed on the
Vessel by suppliers in terms of the Supply Contracts;
(D) the Owner wishes to let to the Hirer and the Hirer wishes to hire the
Ship subject to the terms and conditions of this Agreement.
NOW IT IS HEREBY AGREED as follows :
1 PURPOSE AND DEFINITIONS
1.1 Purpose
This Agreement sets out the terms and conditions upon and subject to
which the Owner agrees to let and to sell to the Hirer, and the Hirer
agrees to hire and to purchase from the Owner, the Ship and the terms
upon which the Surety guarantees the obligations of the Hirer under
this Agreement.
1.2 Definitions
In this Agreement, unless the context otherwise requires:
"ACCOUNT ASSIGNMENT" means the assignment to be executed by the Hirer
in respect of the Cash Collateral Account in the form set out in
schedule 7;
"AGREEMENT" means this Agreement as the same may from time to time be
supplemented and amended;
<PAGE> 6
"APPROVED BROKERS" means such firm of insurance brokers, appointed by
the Hirer, as may from time to time be approved in writing by the Owner
for the purposes of this Agreement;
"AUDITORS" means the auditors of the Owner;
"BANK ONE ASSIGNMENT" means the assignment by the Hirer in favour of
Bank One, Texas N.A. dated 21 October 1997 of all the Hirer's rights,
title and interest in and to the Hirer's book and other debts and all
other moneys of whatever nature due, owing of payable to the Hirer (and
including, without limitation, the benefit of all rights, securities
and guarantees enjoyed or held by it in relation to any of the above)
and including in each case (without limitation) all claims, and all
moneys which may at any time be or become paid or payable to the Hirer,
under or in respect of any of the above (including proceeds of any
claims, awards or judgment and any returns of premium) and all the
Hirer's right, title and interest in and to the Security Account (as
defined in the said assignment) all monies now or in the future
standing to the credit of the Security Account (as defined in the said
assignment) and the Hirer's right to the repayment of the balances and
interest in the Security Account (as defined in the said assignment),
as security for a Revolving Credit Facility provided by that bank to
the Hirer;
"BORROWED MONEY" means Indebtedness incurred in respect of (i) money
borrowed or raised, (ii) any bond, note, loan stock, debenture or
similar instrument, (iii) acceptance or documentary credit facilities,
(iv) deferred payments for assets or services acquired, (v) rental
payments under and any amounts payable on termination of leases
(whether in respect of ships, land machinery equipment or otherwise)
entered into primarily as a method of raising finance or of financing
the acquisition of the asset leased, (vi) guarantees, bonds, stand-by
letters of credit or other instruments issued in connection with the
performance of contracts and (vii) guarantees or other assurances
against financial loss in respect of Indebtedness of any person falling
within any of paragraphs (i) to (vi) above;
"BUSINESS DAY" means a day on which banks are open for the transaction
of business of the nature concerned in London and New York and (if the
context so requires) in any place in which payment is to be made
hereunder or in such other place or places from time to time herein
specified;
"CAPITAL OUTSTANDING" means the capital amounts outstanding under this
Agreement from time to time and set out in the Capital Schedule;
"CAPITAL SCHEDULE" means schedule 9;
"CASH COLLATERAL" means the amount from time to time standing to the
credit of the Cash Collateral Account excluding interest accrued
thereon or credited thereto;
<PAGE> 7
"CASH COLLATERAL ACCOUNT" means an interest bearing Dollar account of
the Hirer to be opened by the Hirer with British Linen Bank Limited
designated "Horizon Exploration Limited " and with account number
33433/031;
"CASUALTY AMOUNT" means Three hundred and seventy five thousand Dollars
($375,000) (or the equivalent in any other currency);
"CLASSIFICATION" means the classification "DNV + A1(MV), EO, SF, Supply
Vessel, Helideck" with the Classification Society or such other
classification as the Owner shall, at the request of the Hirer, have
agreed in writing shall be treated as the Classification for the
purposes of this Agreement;
"CLASSIFICATION SOCIETY" means Det Norske Veritas or such other
classification society which the Owner shall, at the request of the
Hirer, have agreed in writing shall be treated as the Classification
Society for the purposes of this Agreement;
"COMPULSORY ACQUISITION" means requisition for title or other
compulsory acquisition, requisition, appropriation, expropriation,
deprivation, forfeiture or confiscation for any reason of the Ship by
any Government Entity or other competent authority, whether de jure or
de facto, but shall exclude requisition for use or hire not involving
requisition of title;
"CORPORATE GUARANTEE" means the guarantee issued or (as the context may
require) to be issued by the Corporate Guarantors on a joint and
several basis in favour of the Owner in the form set out in schedule 5;
"CORPORATE GUARANTORS" means (a) Energy Research International of PO
Box 265 George Town, Grand Cayman, Cayman Islands and (b) Eagle
Geophysical Inc. of 50 Briar Hollow West, 6th Floor, Houston, Texas
77027 and includes their respective successors and permitted assignees;
"DELIVERY" means the time when the Owner shall deliver the Ship to the
Hirer pursuant to clause 6.1;
"DELIVERY DATE" means the date on which Delivery shall occur;
"DOLLARS" and "$" means the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement
in Dollars, means funds which are for same day settlement in the New
York Clearing House Interbank Payments System (or such other U.S.
Dollar funds as may at the relevant time be customary for the
settlement of international banking transactions denominated in United
States dollars);
"DOWNPAYMENT" means (i) the amount of US$8,200,000 paid to the Owner by
the Hirer as a downpayment in accordance with clause 8.1 and (ii) the
amount of any deduction or withholding required in respect of any
payments made by the Owner under the Sale and Purchase Agreement;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, security interest, title
retention or other
<PAGE> 8
encumbrance securing, or any right conferring a priority of payment in
respect of, any obligation of any person;
"EQUIPMENT" means the seismic and other equipment installed or to be
installed as the case may be on the Vessel, as listed in schedule 6
attached hereto;
"EQUIPMENT SALE AGREEMENT" means the agreement of even date herewith
between the Hirer and the Owner in terms whereof the Hirer sells to the
Owner and the Owner purchases from the Hirer the Equipment;
"EXCLUDED EQUIPMENT" means the items of equipment other than the
Equipment on the Vessel owned by the Hirer or a third party and listed
in Schedule 8 attached hereto and other equipment on the Vessel but not
fixed to and not forming part of the Vessel and owned by the Hirer or a
third party,
"GROUP COMPANY" means any company in the Eagle Geophysical Inc group
of companies;
"GOVERNMENT ENTITY" means and includes (whether having a distinct legal
personality or not) any national or local government authority, board,
commission, department, division, organ, instrumentality, court or
agency and any association, organisation or institution of which any of
the foregoing is a member or to whose jurisdiction any of the foregoing
is subject or in whose activities any of the foregoing is a
participant;
"HIRE PERIOD" means the period of the Hire Term during which the Hirer
shall be entitled to the possession and use of the Ship in accordance
with this Agreement;
"HIRE TERM" means the period commencing on the Delivery Date and ending
on 31 March 2003;
"HIRER'S ASSIGNMENT" means the assignment of the Hirer's interests in
the Insurances and any Requisition Compensation in favour of the Owner
in the form set out in schedule 3;
"HIRER'S DOCUMENTS" means this Agreement, the Hirer's Assignment, the
Account Assignment, the Sale and Purchase Agreement, the Equipment Sale
Agreement, the Sub-Charter, and all notices, consents, certificates and
other documents and agreements to which the Hirer is party issued or,
as the case may be, to be issued pursuant to any of the foregoing;
"INDEBTEDNESS" means any obligation for the payment or repayment of
money, whether as principal or as surety and whether present or future,
actual or contingent;
"INSURANCES" means all policies and contracts of insurance (which
expression includes all entries of the Ship in a protection and
indemnity or war risks association) which are from time to time during
the Hire Period in place or taken out or entered into by the Hirer
pursuant to clause 18 for the benefit of the Hirer
<PAGE> 9
and the Owner in respect of the Ship and her Sub-Earnings or otherwise
howsoever in connection with the Ship and all benefits thereof
(including claims of whatsoever nature and return of premiums);
"LIBOR" means the rate at which the Reference Bank was able to acquire
deposits in the relevant currency in the London Interbank Market for
such period (not exceeding one month) as the Owner may determine in
amounts comparable with the relevant sum in respect of which the rate
of interest falls to be determined or, where by reason of circumstances
affecting the London Interbank Market generally deposits in the
relevant currency are not in the ordinary course of business, the rate
determined by the Owner as being available at any relevant time in the
London Interbank Market;
"LOSS PAYABLE CLAUSES" means the provisions regulating the manner of
payment of sums receivable under the Insurances which are to be
incorporated in the relevant insurance documents, such Loss Payable
Clauses to be in the forms set out in schedule 2, or in such other
forms as may from time to time be agreed in writing by the Owner;
"MANAGER" means Ervik Marine Services A/S of Brunhelmgt 2, N 6004,
Aalesund, Norway or any other person appointed by the Hirer, with the
prior written consent of the Owner, as the manager of the Ship and
includes its successors and assignees;
"MANAGEMENT AGREEMENT" means the agreement dated 19 December 1990 (as
amended) between Simon-Horizon Limited and the Manager (assigned by
Simon-Horizon Limited to the Hirer on 15 July 1994) or any other
agreement previously approved in writing by the Owner between the Hirer
and the Manager providing (inter alia) for the Manager to manage the
Ship;
"MANUALS AND TECHNICAL RECORDS" means all such books, records, logs,
manuals, handbooks, technical data, drawings and other materials and
documents (whether or not kept or required to be kept in compliance
with any applicable laws or the requirements of the Classification
Society) relating to the Ship and the Equipment;
"MONTH" means a calendar month;
"NET INITIAL INVESTMENT" means an amount of US$31,300,000 being the
amount of the Total Expenditure Amount less the amount of the
Downpayment;
"NET SALE PROCEEDS" means, in relation to a sale of the Ship, the
amount actually received by the Owner from a purchaser of the Ship
after deducting the Owner's expenses in connection with such sale
including without limitation (where applicable) broker's commissions,
Owner's marketing expenses, legal costs, agency fees and port charges,
insurance premiums, stamp duties, registration fees and any expenses
relating to the repair of the Ship (including putting the Ship in
class) intended to restore the Ship to the condition required by this
Agreement or pursuant to the provisions of any sale and purchase
agreement in
<PAGE> 10
respect of the sale of the Ship and which are payable and/or are paid
by the Owner;
"NOTICE OF ASSIGNMENT" means a notice by the Hirer of the assignment
pursuant to the Hirer's Assignment such notice to be in the form set
out in Schedule 5 or in such other form consistent with the terms of
this Agreement as the Owner may approve or require in writing;
"PERMITTED ENCUMBRANCE" means:
(a) any Encumbrance arising from the Owner's own acts or defaults or
claims against the Owner personally for which the Owner would not
be entitled to indemnification under this Agreement;
(b) any Encumbrance for Taxes either not yet assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings (and for the payment of which
adequate reserves have been provided) so long as any such
proceedings or the continued existence of such Encumbrance do not
involve any likelihood of the sale, forfeiture or loss of, or of
any interest in, the Ship;
(c) liens arising in the ordinary course of business by statute or by
operation of law in respect of obligations which are not overdue
or which are being contested in good faith by appropriate
proceedings (and for the payment of which adequate reserves have
been provided or covered by adequate insurance) so long as any
such proceedings or the continued existence of such lien do not
involve any likelihood (prior to the outcome of any relevant
proceedings) of the sale, forfeiture or loss of, or of any
interest in, the Ship;
(d) Encumbrances arising out of claims, judgements or awards against
the Hirer which are being contested in good faith or which are
subject to a pending appeal and for which there shall have been
granted a stay of execution pending such appeal and for the
payment of which adequate reserves have been provided or covered
by adequate insurance to the satisfaction of the Owner; and
(e) Permitted Liens;
(f) the Bank One Assignment for as long as the Hirer remains indebted
to Bank One, Texas N.A. under the facility secured by such
assignment.
"PERMITTED LIENS" means any lien for general average or for Master's
officer's or crew's wages outstanding in the ordinary course of
trading, any lien for salvage and any ship repairer's or outfitter's
possessory lien for a sum not exceeding the Casualty Amount;
"PURCHASE PRICE" means US$31,300 payable by the Hirer to the Owner as
consideration for the purchase of the Ship under this Agreement;
<PAGE> 11
"RECOVERABLE VAT" means Value Added Tax in respect of which a person is
entitled to claim a credit or repayment pursuant to sections 24, 25 and
26 of the Value Added Tax Act 1994;
"REFERENCE BANK" means The Governor and Company of the Bank of
Scotland;
"RELEVANT DOCUMENTS" means the Hirer's Documents, the Corporate
Guarantee and any other document or instrument from time to time
executed by the Hirer, and/or the Corporate Guarantor as a guarantee
and/or security for the obligations of the Hirer and/or any sums of
money from time to time owing, whether actually or contingently, under
or pursuant to this Agreement or any of the other Hirer's Documents and
all notices, consents, certificates and other documents and agreements
to which any of the Hirer and the Corporate Guarantor is a party issued
or, as the case may be, to be issued pursuant to any of the foregoing;
"RELEVANT EVENT" means any Termination Event or any event which after
the giving of notice or lapse of time or the satisfaction of any other
condition (or any combination thereof) would constitute a Termination
Event;
"RELEVANT PARTY" means any or all of the Hirer, the Surety and the
Corporate Guarantors or any other party (other than the Owner) to any
of the Relevant Documents;
"RELEVANT RATE OF INTEREST" means the rate of interest determined by
the Owner to be three per cent. (3%) per annum above LIBOR;
"RENTAL AMOUNT" means an amount of US$21.11 per US$1000 of the Net
Initial Investment adjusted at a rate of US$0.52 per US$1000 of Net
Initial Investment per 100 basis points variance from 6% p.a. at which
the Owner fixes its funding of the Net Initial Investment, adjusted pro
rata where the variance is other than a round 100 basis points;
"RENTAL PAYMENT DATE" means 30th June 1998 and each of the dates
falling at monthly intervals thereafter;
"REQUISITION COMPENSATION" means all sums of money or other
compensation from time to time payable in respect of the Compulsory
Acquisition of the Ship;
"SALE AND PURCHASE AGREEMENT" means the Agreement for the purchase of
the Vessel by the Owner concluded simultaneously herewith between the
Owner and Royal Bank of Scotland (Industrial Leasing) Limited and the
Hirer;
"SHIP" means the Vessel and the Equipment;
"SUB-CHARTER" means any time charter to be entered into in respect of
the Ship between the Hirer and a Sub-Charterer and includes any future
time charter in respect of the Ship entered into by the Hirer with the
prior consent of the Owner;
"SUB-CHARTERER" means the Surety or any other Group Company;
<PAGE> 12
"SUB-EARNINGS" means all moneys whatsoever from time to time due or
payable to the Hirer during the Hire Period arising out of the use or
operation of the Ship including (but without limiting the generality of
the foregoing) all freight, charterhire and passage moneys, income
arising under pooling arrangements, compensation payable to the Hirer
in the event of requisition of the Ship for hire, remuneration for
salvage and towage services, demurrage and detention moneys, and
damages for breach (or payments for variation or termination) of any
charterparty or other contract for the employment of the Ship from time
to time entered into by the Hirer;
"SUBSIDIARY" of a person means any company or entity directly or
indirectly controlled by such person for which purpose "control" means
either ownership of more than 50 per cent of the voting share capital
(or equivalent right of ownership) of such company or entity or power
to direct its policies and management whether by contract or otherwise;
"SUPPLY CONTRACTS" means the contracts referred to in clause 2,
concluded by the Hirer or (as the case may be) to be concluded by the
Hirer for the supply and installation of the Equipment;
"SUSPENSE ACCOUNT" means an interest bearing Dollar account opened by
the Owner with British Linen Bank Limited designated "British Linen
Shipping Limited - O/A Horizon Exploration Limited" and with account
number 22322/031;
"TAXES" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature including, without limitation,
corporation, capital gains, income, gross receipts, franchise,
transfer, sales, use, business, occupation, transaction, purchase,
value added, excise, personal property, real property, stamp,
documentary, national insurance or other taxes at the rate applicable
for the time being imposed by any national or local taxing or fiscal
authority or any other agency or government, together with interest
thereon, penalties in respect thereof and "Taxation" shall be construed
accordingly;
"TERMINATION EVENT" means any of the events or circumstances described
in clause 26.1 or clause 26.2;
"TERMINATION SUM" means (i) during the period until (and including) the
third anniversary of the Delivery Date an amount equalling one hundred
and one per cent (101%) of the Capital Outstanding as at the date of
termination of this Agreement and (ii) thereafter an amount equalling
one hundred point two five per cent (100.25%) of the Capital
Outstanding as at the date of termination of this Agreement;
"TOTAL EXPENDITURE AMOUNT" means an aggregate amount not exceeding
US$36,000,000 expended by the Owner for the acquisition of the Vessel
under the Sale and Purchase Agreement and for the acquisition of the
Equipment under the Equipment Sale Agreement and, in addition, Value
Added Tax of US$3,500,000 on the purchase of the Equipment;
<PAGE> 13
"TOTAL LOSS" means:
(a) actual or constructive or compromised or arranged total loss of
the Ship; or
(b) the Compulsory Acquisition of the Ship; or
(c) the hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation of the Ship (other than where the same
amounts to Compulsory Acquisition of the Ship) by any Government
Entity, or by persons acting or purporting to act on behalf of
any Government Entity, which deprives the Hirer of the use of the
Ship unless the Ship be released and restored to the Hirer from
such hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation within one hundred and eighty (180)
days after the occurrence thereof;
"UNITED KINGDOM" means Great Britain and Northern Ireland;
"UPGRADE CONTRACT" means agreement no 048PP016 concluded between the
Hirer and Cammell Laird Group plc and dated 2 October 1997;
"UPGRADE WORKS" means the refurbishment and upgrading works conducted
in respect of the Vessel by Cammell Laird Group plc;
"VALUE ADDED TAX" or "VAT" means value added tax as provided for in the
Value Added Tax Act 1983 or any similar tax replacing or introduced in
addition to the same;
"VESSEL" means m.v. "LABRADOR HORIZON" presently registered under
Bahamian flag with Official Number 715224 and includes any share or
interest therein her engines, machinery, boats, tackle, outfit,
equipment, spare gear, fuel, consumable, or other stores, belongings
and appurtenances whether on board or ashore together with any and all
substitutions therefor and replacements and renewals thereof from time
to time made in or to her in accordance with the provisions of this
Agreement and, where the context permits, "Vessel" shall include the
Manuals and Technical Records.
1.3 Insurance Definitions
In clause 16:
(a) "EXCESS RISKS" means the proportion (if any) of claims for
general average salvage and salvage charges and under the
ordinary collision clause not recoverable in consequence of the
value at which a vessel is assessed for the purpose of such
claims exceeding her insured value;
(b) "PROTECTION AND INDEMNITY RISKS" means the usual risks covered by
an English protection and indemnity association including the
proportion (if any) not recoverable in case of collision under
the ordinary collision clause; and
<PAGE> 14
(c) "WAR RISKS" includes the risk of mines and all risks excluded
from the standard form of English marine policy by the free of
capture and seizure clause.
1.4 Headings
Clause headings and the index are inserted for convenience of reference
only and shall be ignored in the interpretation of this Agreement.
1.5 References
In this Agreement, unless the context otherwise requires:
(a) references to clauses and schedules are to be construed as
references to clauses of, and schedules to, this Agreement and
references to this Agreement include its schedules;
(b) references to (or to any specified provision of) this Agreement
or any other document shall be construed as references to this
Agreement, that provision or that document as in force for the
time being and as amended in accordance with the terms thereof,
or, as the case may be, with the agreement of the relevant
parties and (where such consent is, by the terms of this
Agreement or the relevant document, required to be obtained as a
condition to such amendment being permitted) the prior written
consent of the Owner;
(c) words importing the plural shall include the singular and vice
versa;
(d) references to a person shall be construed as references to an
individual, firm, company, corporation, unincorporated body of
persons or any Government Entity; and
(e) references to statutory provisions shall be construed as
references to those provisions as replaced, amended or re-
enacted from time to time.
1.6 Value Added Tax
Any Value Added Tax or any similar tax properly chargeable in respect
of supplies of goods or services (including charterhire) under the
terms of this Agreement shall be payable in addition to the amounts
otherwise payable hereunder, which amounts are determined exclusive of
Value Added Tax or any similar tax.
2 THE ACQUISITION, UPGRADE WORKS AND SUPPLY CONTRACTS
2.1 The Owner has agreed to purchase the Vessel, under the terms of the
Sale and Purchase Agreement and the Owner has agreed to purchase the
Equipment under the Equipment Sale Agreement for the purpose of letting
the Ship to the Hirer under this Agreement. The Owner's obligations to
purchase the Vessel and the Equipment are subject to the condition that
the Owner shall have received the
<PAGE> 15
documents and evidence specified in paragraph 1 of schedule 1 in form
and substance satisfactory to the Owner and are further subject to the
Owner being obliged to let the Ship to the Hirer pursuant to clause 5
of this Agreement.
2.2 At the date of purchase of the Ship by the Owner the Hirer is in
possession of the Ship for the purposes of attending to the conclusion
of the Upgrade Works in respect of the Vessel and the supply and
installation of the Equipment under the Supply Contracts. The Upgrade
Works and the supply and installation of the Equipment will be
conducted by contractors approved by the Owner at the cost of the
Hirer, which costs are to be reimbursed by the Owner to the Hirer.
Nothing in this Agreement, the Sale and Purchase Agreement or the
Equipment Sale Agreement shall oblige the Owner to expend after taking
account of the Downpayment an amount in excess of the Net Initial
Investment (other than by reason of interest accrued on the Suspense
Account) on the purchase of the Vessel and, the purchase of the
Equipment. The Hirer shall pay to the Owner on date of delivery of the
Ship value added tax in an amount of three million five hundred
thousand US Dollars (US$3,500,000) in respect of the Equipment,
converted at a Pounds Sterling/US Dollars exchange rate of 1.684
(equalling (pound)2,078,384.80), such obligation being discharged upon
payment or by set-off pursuant to clause 8.1 of the Downpayment.
2.3 Subject to the penultimate sentence of clause 2.2 and to the condition
that the Owner shall have received the documents and evidence specified
in paragraph 2 of schedule 1 in form and substance satisfactory to the
Owner, the Owner will on the Delivery Date reimburse the Hirer from the
Net Initial Investment, costs incurred by the Hirer under the Supply
Contracts and the Upgrade Contract up to the Delivery Date. The balance
of the Net Initial Investment not paid by way of reimbursement to the
Hirer nor paid to Royal Bank of Scotland (Industrial Leasing) Limited
pursuant to the Sale and Purchase Agreement, on the Delivery Date,
will, on the Delivery Date be paid by the Owner into the Suspense
Account and all and any interest (at a market related monthly rate
determined by the Owner) accrued on the amount standing to the credit
of the Suspense Account from time to time shall be paid to the Hirer on
the last day of each calendar month or at such other intervals as may
be agreed between the Owner and the Hirer from time to time. Any unused
balance on the Suspense Account after payment of all suppliers under
the Supply Contracts or after expiry of the final drawdown date
referred to in clause 2.4 shall be applied towards the amount standing
to the credit of the Cash Collateral Account.
2.4 Subject to the penultimate sentence of clause 2.2 and to the condition
that the Owner shall have received the documents and evidence specified
in paragraph 3 of schedule 1 in form and substance satisfactory to the
Owner not less than five (5) Business Days prior to the date of
reimbursement or payment as set out below and subject to the further
condition that the conditions in clause 5.2 are fulfilled (on the basis
that references in clause 5.2 to "DELIVERY" are read and construed as
references to the date of reimbursement and payment as set out below)
the Owner will on each written request of the Hirer on the last day of
each calendar month after the Delivery Date (the "PAYMENT RELEASE
DATES")
<PAGE> 16
release any or all of the funds standing to the credit of the
Suspense Account in reimbursement to the Hirer for costs incurred and
paid by the Hirer under the Supply Contracts and under the Upgrade
Contract provided that the final drawdown date for the Hirer in
respect of any costs so incurred shall be 30 June 1998, after which
date the Owner shall not be obliged to release any funds to the Hirer
from the Suspense Account pursuant to this clause 2.4.
2.5 Upon the Owner's request, the Hirer will effect an assignment in favour
of the Owner of the benefit of any warranties and indemnities obtained
by the Hirer from suppliers under the Supply Contracts or from Cammell
Laird Group plc in respect of the Upgrade Works or the Hirer will
otherwise procure to the satisfaction of the Owner, the extension of
the benefit of such warranties and indemnities to the Owner.
3 HIRER'S REPRESENTATIONS AND WARRANTIES
3.1 Continuing Representations and Warranties
(a) The Hirer represents and warrants to the Owner that:
(i) the Hirer is duly incorporated and validly existing in good
standing under the laws of England as a limited liability
company and has power to carry on its business as it is now
being conducted and to own its property and other assets;
(ii) the Hirer has power to execute, deliver and perform its
obligations under the Hirer's Documents and all necessary
corporate, shareholder and other action has been taken to
authorise the execution, delivery and performance of the
same;
(iii) the Hirer's Documents constitute, or will upon execution
thereof constitute, valid, legally binding and enforceable
obligations of the Hirer;
(iv) the execution and delivery of, the performance of its
obligations under, and compliance by the Hirer with the
provisions of, the Hirer's Documents will not (i)
contravene any existing applicable law, statute, rule or
regulation or any judgment, decree or permit to which the
Hirer is subject, (ii) conflict with, or result in any
breach of any of the terms of, or constitute a default
under, any agreement or other instrument to which the Hirer
is a party or is subject or by which it or any of its
property is bound, or (iii) contravene or conflict with any
provision of the Hirer's Memorandum and Articles of
Association or (iv) result in the creation or imposition of
or oblige the Hirer to create any Encumbrance (other than a
Permitted Encumbrance) on the Hirer's undertaking, assets,
rights or revenues;
<PAGE> 17
(v) the certified consolidated financial statements schedule in
a form approved in advance by the Owner, and denominated in
US Dollars for the period from 1 January 1997 up to 31st
December 1997 as delivered to the Owner has been prepared
in accordance with generally accepted accounting principles
and practices in the United States of America which have
been consistently applied and present fairly and accurately
the financial position of the Hirer as at such date and the
results of the operations of the Hirer for the period ended
on such date, and, as at such date, the Hirer did not have
any significant liabilities (contingent or otherwise) which
are not disclosed by, or reserved against in, such schedule
and the Hirer did not have any unrealised or anticipated
losses which are not disclosed by, or reserved against in,
such schedule;
(vi) save for the registration of the Account Assignment and the
Hirer's Assignment, it is not necessary to ensure the
legality, validity, enforceability or admissibility in
evidence of the Hirer's Documents that any of them or any
other instrument be notarised, filed, recorded, registered
or enrolled in any court, public office or elsewhere in
England or that any stamp, registration or similar tax or
charge be paid in England on or in relation to the Hirer's
Documents and the Hirer's Documents are, or will, upon
execution thereof by the Hirer, be in proper form for their
enforcement in the courts of England;
(vii) the choice by the Hirer of English law to govern this
Agreement, the Account Assignment and the Hirer's
Assignment and the submission by the Hirer to the
non-exclusive jurisdiction of the English courts are valid
and binding;
(viii)the Hirer is subject to civil and commercial law with
respect to its obligations under the Hirer's Documents and
the transactions contemplated thereby constitute private
and commercial acts done for private and commercial
purposes and neither the Hirer nor any of its assets is
entitled to immunity on the grounds of sovereignty or
otherwise from any legal action or proceeding (which shall
include, without limitation, suit, attachment prior to
judgment, execution or other enforcement); and
(ix) the Hirer is an indirect wholly owned Subsidiary of Eagle
Geophysical Inc.
(b) The Surety represents and warrants to the Owner that:
(i) the Surety is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and
has power to carry on its business as it is now being
conducted and to own its property and other assets;
<PAGE> 18
(ii) the Surety has power to execute, deliver and perform its
obligations under each of the Hirer's Documents to which
the Surety is a party and all necessary corporate,
shareholder and other action has been taken to authorise
the execution, delivery and performance of the same;
(iii) the Hirer's Documents to which the Surety is a party
constitute, or will upon execution thereof constitute,
valid, legally binding and enforceable obligations of the
Surety;
(iv) the execution and delivery of, the performance of its
obligations under, and compliance by the Surety with the
provisions of each of the Hirer's Documents to which the
Surety is a party will not (i) contravene any existing
applicable law, statute, rule or regulation or any
judgment, decree or permit to which the Surety is subject,
(ii) conflict with, or result in any breach of any of the
terms of, or constitute a default under, any agreement or
other instrument to which the Surety is a party or is
subject or by which it or any of its property is bound, or
(iii) contravene or conflict with any provision of the
Surety's Articles of Incorporation or Bylaws (iv) result in
the creation or imposition of or oblige the Surety to
create any Encumbrance (other than a Permitted Encumbrance)
on the Surety's undertaking, assets, rights or revenues;
(v) the Surety is subject to civil and commercial law with
respect to its obligations under the Hirer's Documents and
the transactions contemplated thereby constitute private
and commercial acts done for private and commercial
purposes and neither the Surety nor any of its assets is
entitled to immunity on the grounds of sovereignty or
otherwise from any legal action or proceeding (which shall
include, without limitation, suit, attachment prior to
judgment, execution or other enforcement);
(vi) it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of any of the
Hirer's Documents to which the Surety is a party that any
of them or any other instrument be notarised, filed,
recorded, registered or enrolled in any court, public
office or elsewhere in England or that any stamp,
registration or similar tax or charge be paid in England on
or in relation to the Hirer's Documents and the Hirer's
Documents are, or will, upon execution thereof by the
Surety, be in proper form for their enforcement in the
courts of England;
(vii) the choice by the Surety of English law to govern this
Agreement, and the submission by the Surety to the
non-exclusive jurisdiction of the English courts are valid
and binding; and
<PAGE> 19
(viii)the Surety is a wholly owned Subsidiary of Eagle
Geophysical Inc.,
3.2 Initial Representations and Warranties
The Hirer and Surety further represent and warrant to the Owner that:
(a) there has been no material adverse change in the financial
position of the Hirer from that set forth in the financial
statements referred to in clause 3.1 (a) (v);
(b) every consent, authorisation, licence or approval of, or
registration with or declaration to, governmental or public
bodies or authorities or courts required by the Hirer or the
Surety to authorise, or required by the Hirer or the Surety in
connection with, the execution, delivery, validity,
enforceability or admissibility in evidence of the Hirer's
Documents or the performance by the Hirer or the Surety of its
obligations under the Hirer's Documents has been obtained or made
and is in full force and effect and there has been no default in
the observance of any of the conditions or restrictions imposed
in, or in connection with, any of the same;
(c) the obligations of the Hirer or the Surety under the Hirer's
Documents are direct, general and unconditional obligations of
the Hirer or the Surety and rank at least pari passu with all
other present and future unsecured and unsubordinated obligations
(including contingent obligations) of the Hirer or the Surety;
(d) neither the Hirer nor the Surety is (nor would be with the giving
of notice or lapse of time) in breach of or in default under any
agreement relating to Borrowed Money to which it is a party or by
which it may be bound;
(e) the information, exhibits and reports furnished by the Hirer or
the Surety to the Owner in connection with the matters
contemplated by the Hirer's Documents or in connection with the
negotiation and preparation of the Hirer's Documents are true and
accurate in all material respects and not misleading, do not omit
material facts and all reasonable enquiries have been made to
verify the facts and statements contained therein; there are no
other facts the omission of which would make any fact or
statement therein misleading;
(f) no Taxes are imposed by withholding or otherwise on any payment
to be made by the Hirer or the Surety under the Hirer's Documents
or are imposed on or by virtue of the execution or delivery by
the Hirer or the Surety of the Hirer's Documents or any other
document or instrument to be executed or delivered under any of
the Hirer's Documents;
(g) no Relevant Event has occurred and is continuing;
<PAGE> 20
(h) neither the Hirer's interest in the Sub-Earnings, the Insurances
or any Requisition Compensation nor any part thereof is or will
be on the Delivery Date, or the Payment Release Dates subject to
any Encumbrances save for any Permitted Encumbrance; and
(i) the copies of the Management Agreement delivered by the Hirer to
the Owner are true and complete copies of such documents, and, to
the best of the Hirer's and the Surety's knowledge and belief,
each of such documents constitutes the valid, legally binding and
enforceable obligations of the parties thereto and is in full
force and effect and there have been no material amendments or
variations thereof or defaults thereunder;
(j) no litigation, arbitration or administrative proceeding is taking
place, pending or, to the knowledge of the officers of the Hirer,
threatened against the Hirer which in the opinion of the Owner
could reasonably be expected to have a material adverse effect on
the business, assets or financial condition of the Hirer;
3.3 Repetition of Representations and Warranties
On and as of the Delivery Date and each of the Payment Release Dates
and on each Rental Payment Date (a) the Hirer and the Surety shall be
deemed to repeat the representations and warranties in clause 3.1 (so
that the representations and warranties in clause 3.1(a) (v) in respect
of the Hirer shall for this purpose refer to the then latest audited
financial statements delivered to the Owner) as if made with reference
to the facts and circumstances existing on such day and (b) the Hirer
shall be deemed to further represent and warrant to the Owner that the
then latest audited financial statements delivered to the Owner (if
any) pursuant to clause 13.1(c) have been prepared in accordance with
generally accepted accounting principles and practices in the United
Kingdom which have been consistently applied and present fairly and
accurately the financial position of the Hirer as at the end of the
financial period to which the same relate and the results of the
operations of the Hirer for the financial period to which the same
relate and, as at the end of such financial period, the Hirer did not
have any significant liabilities (contingent or otherwise) which are
not disclosed by, or reserved against in, such financial statements and
the Hirer did not have any unrealised or anticipated losses which are
not disclosed by, or reserved against in, such financial statements.
3.4 Not prejudiced by Owner's Investigation
The rights and remedies of the Owner in relation to any
misrepresentation or breach of warranty on the part of the Hirer or the
Surety shall not be prejudiced by any investigation by or on behalf of
the Owner into the affairs of any person (other than the Owner) being a
party to any of the Relevant Documents, by the performance of any of
the Relevant Documents, or by any other act or thing which may be done
or omitted to be done by the Owner under any of the
<PAGE> 21
Relevant Documents which would or might, but for this clause 3.4,
prejudice such rights and remedies.
4 TERM OF AGREEMENT
4.1 Hire Term
Subject to the terms and conditions of this Agreement, upon completion
of the Owner's purchase of the Vessel pursuant to the Sale and Purchase
Agreement the Owner shall let and demise to the Hirer, and the Hirer
shall hire, the Ship from the Delivery Date for the period of up to
five (5) years from and including the Delivery Date but in any event
for a period terminating on 31 March 2003.
4.2 Voluntary Termination
The Hirer shall be entitled, on giving to the Owner not less than
thirty (30) days notice (which notice, when given, shall be
irrevocable), to terminate the Hire Period. Upon such termination of
the Hire Period the Hirer shall pay to the Owner an amount equal to the
aggregate of (a) the Termination Sum and (b) all amounts due to the
Owner under clause 31.3 together with all other moneys then due and
owing to the Owner under this Agreement and the other Hirer's Documents
and thereupon the Hirer shall have the option to purchase the Ship on
such date and the provisions of clause 31 shall apply mutatis mutandis
to such sale and purchase.
5 CONDITIONS
5.1 Delivery Conditions
The Owner shall have no obligation to deliver the Ship to the Hirer
after 7 April 1998 or such later date agreed between the Owner and the
Hirer and furthermore the obligation of the Owner to let the Ship to
the Hirer under this Agreement is subject to the condition that on the
Delivery Date, prior to Delivery, the Owner shall have received the
documents and evidence specified in paragraph 1 of schedule 1 in form
and substance satisfactory to the Owner.
5.2 Further Conditions
The obligation of the Owner to let the Ship to the Hirer under this
Agreement is subject to the further conditions that immediately prior
to Delivery:
(a) the representations and warranties set out in clauses 3.1(a) and
3.1(b) (and so that the representation and warranty in clause
3.1(a) (v) shall for this purpose refer to the then latest
certified consolidated financial statements schedule delivered to
the Owner under clause 13.1), the representations and warranties
set out in clauses 4.1 and 4.2 of the Corporate Guarantee (and so
that the representation and warranty in clause 4.1(f) of the
Corporate Guarantee shall for this purpose refer to the then
latest unaudited financial statements (in the form of a Form 10-Q
filing) delivered to the Owner under clause 5.1 of the Corporate
<PAGE> 22
Guarantee) are true and correct as if each was made with respect
to the facts and circumstances existing at such time; and
5.3 no Relevant Event shall have occurred and be continuing or would arise
by reason of Delivery taking place.
5.4 Temporary Waivers
The conditions specified in clauses 5.1 and 5.2 are inserted for the
sole benefit of the Owner and may be waived in whole or in part and
with or without conditions by the Owner provided always that if any of
the said conditions are outstanding after Delivery has taken place (or,
for the purpose of clause 2.4, after the relevant Payment Release Date)
then, unless the Owner shall have given a specific written waiver or
deferral in respect thereof, the Hirer shall ensure that each such
outstanding condition is fulfilled within fifteen (15) Business Days of
the Delivery Date (or the relevant Payment Release Date, as the case
may be) and provided further that the Owner shall be entitled to treat
the failure of the Hirer to perform such outstanding conditions within
such period of fifteen (15) Business Days as a Termination Event and as
a repudiatory breach of this Agreement by the Hirer.
5.5 Updating of Conditions
Not later than five (5) Business Days prior to each Rental Payment
Date, the Owner may request and the Hirer shall, not later than two (2)
Business Days prior to such date, deliver to the Owner on such request
further favourable certificates and/or opinions as to any or all of the
matters which are the subject of clauses 2, 3, 5, 13 and 26 of this
Agreement and clauses 4 and 5 of the Corporate Guarantee.
6 DELIVERY AND ACCEPTANCE
6.1 Commencement of Hire Term
Delivery of the Ship by the Owner and acceptance thereof by the Hirer
shall be evidenced by a protocol of delivery and acceptance signed on
behalf of the Owner and the Hirer (which protocol shall state the date,
time and place at which delivery is agreed to have taken place),
whereupon the Ship shall become subject to and governed by this
Agreement and the Hire Term shall commence.
7 EXTENT OF OWNER'S LIABILITY; THIRD PARTY WARRANTIES
7.1 Quiet Enjoyment
The Owner warrants that, without prejudice to the representations and
warranties on the part of the Hirer contained in the Sale and Purchase
Agreement and the Equipment Sale Agreement, and subject to clause 19,
clause 23.1 and clause 26 of this Agreement, the Owner shall not
interfere during the Hire Period with the use, possession and quiet
enjoyment of the Ship by the Hirer on the terms of this Agreement.
<PAGE> 23
Provided that the Owner shall not be liable to the Hirer for or in
respect of any interruption to the Hirer's use, possession or quiet
enjoyment of the Ship which results directly or indirectly, wholly or
partly, from any act or omission of any person other than the Owner.
7.2 Limitation of Owner's Liability
The Hirer expressly agrees and acknowledges that at the time of
Delivery the Hirer will have been and will remain in possession of the
Ship and that, save only as provided in clause 7.1, no condition,
warranty or representation of any kind is or has been given by or on
behalf of the Owner in respect of the Ship, and accordingly the Hirer
confirms that it has not, in entering into this Agreement, relied on
any condition, warranty or representation by the Owner or any person on
the Owner's behalf (whether authorised or not), express or implied,
whether arising by law or otherwise in relation to the Ship, including,
without limitation, warranties or representations as to the
description, seaworthiness, quality, merchantability, fitness for any
purpose, value, condition, design or operation of any kind or nature of
the Ship, and the benefit of any such condition, warranty or
representation by the Owner is hereby irrevocably and unconditionally
waived by the Hirer. To the extent permissible under applicable law,
the Hirer also waives any rights which it may have in tort in respect
of any of the matters referred to above and irrevocably agrees that the
Owner shall have no greater liability in tort in respect of any such
matter than it would have in contract after taking account of all the
foregoing exclusions. No third party making any representation or
warranty relating to the Ship or any part of the Ship is the agent of
the Owner nor has any such third party authority to bind the Owner
thereby.
7.3 Unfair Contract Terms Act 1977
Notwithstanding the foregoing provisions of this clause 7, (but without
prejudice to the indemnities contained in this Agreement and the other
Hirer's Documents) nothing herein shall afford to the Owner any wider
exclusion of any liability of the Owner for death or personal injury
than the Owner may effectively exclude having regard to the provisions
of the Unfair Contract Terms Act 1977.
8 HIRE PAYMENTS
8.1 Amounts
The Hirer agrees to pay to the Owner on the Delivery Date an amount
equal to the Downpayment. The Hirer and the Owner agree that Hirer's
obligation to pay the Downpayment may be discharged by the Owner
setting-off the amount of the Downpayment against the amount payable by
the Owner to the Hirer under the Equipment Sale Agreement on the
Delivery Date. The Hirer shall pay to the Owner, in respect of the hire
of the Ship during the Hire Period an amount equal to the Rental Amount
on each of 57 consecutive Rental Payment Dates during the Hire Period.
<PAGE> 24
8.2 Unconditional Payment Obligations
The Hirer's obligation to make the payments specified in clause 8.1 and
all other payments in accordance with any of the Hirer's Documents
shall, be absolute and unconditional irrespective of any contingency
whatsoever including (but not limited to) (i) any right of set-off,
counterclaim, recoupment, defence or other right which either party
hereto may have against the other, (ii) any unavailability of the Ship
for any reason, including, but not limited to, any lack or invalidity
of title or any other defect in the title, seaworthiness,
merchantability, fitness for any purpose, condition, design, or
operation of any kind or nature of the Ship, or the ineligibility of
the Ship for any particular use or trade, or for registration or
documentation under the laws of any relevant jurisdiction, or the Total
Loss of, or any damage to, the Ship, (iii) any failure or delay on the
part of either party hereto, whether with or without fault on its part,
in performing or complying with any of the terms or conditions of this
Agreement, (iv) any insolvency, bankruptcy, administration,
reorganisation, arrangement, readjustment of debt, dissolution,
liquidation or similar proceedings by or against the Owner or the
Hirer, (v) any lack of due authorisation of, or other defect in, any of
the Hirer's Documents.
8.3 Advance Payments
No amounts paid in advance shall (except as expressly contemplated by
the provisions of this Agreement) be repayable by or recoverable from
the Owner.
9 PAYMENTS, INTEREST AND CALCULATIONS
9.1 Manner of Payment
All payments to be made by the Hirer under any of the Hirer's Documents
shall be made (unless specifically otherwise provided in this
Agreement) without prior demand and in full, without any set-off or
counterclaim whatsoever and, subject as provided in clause 10.3, free
and clear of any deductions or withholdings in Dollars (or, in the case
of indemnity payments, in the currency in which the cost or expense
which is the subject of the indemnity payment is incurred) for value on
the day on which payment is due to the bank account of British Linen
Bank Limited, at Chase Manhattan Bank, New York, Account Name: British
Linen Bank Limited, Account No. 001 1 911831 or to such other bank
account as the Owner may from time to time have notified to the Hirer
in writing not less than five (5) Business Days prior to the due date
for payment.
9.2 Payments on Business Days
When any payment under any of the Hirer's Documents would otherwise be
due on a day which is not a Business Day, the due date for payment
shall be extended to the next following Business Day unless such
Business Day falls in the next month in which case payment shall be
made on the immediately preceding Business Day.
<PAGE> 25
9.3 Interest on Delayed Payments
If the Hirer fails to pay any sum (including, without limitation, any
sum payable pursuant to this clause 9.3) on its due date for payment
under any of the Hirer's Documents, the Hirer shall pay to the Owner on
demand interest on such sum from the due date up to the date of actual
payment (after as well as before any relevant judgment) at the Relevant
Rate of Interest.
9.4 Calculation of Interest
All interest and other payments of an annual nature under any of the
Hirer's Documents shall accrue from day to day and shall be calculated
on the basis of the actual days elapsed and a 360 day year. Any amounts
payable under any of the Hirer's Documents calculated by reference to a
rate of interest shall be calculated as if such interest accrued from
day to day and on the basis of actual days elapsed and 360 day year.
9.5 Certificates
Any certificate or determination of the Owner as to any rate of
interest or any other amount payable under any of the Hirer's Documents
shall, in the absence of manifest error, be conclusive and binding on
the Hirer.
9.6 Currency Indemnity
If any sum due from the Hirer under any of the Hirer's Documents or
under any order or judgment given or made in relation thereto has to be
converted from the currency ("the first currency") in which the same is
payable under any of the Hirer's Documents or under such order or
judgment into another currency ("the second currency") for the purpose
of (i) making or filing a claim or proof against the Hirer, (ii)
obtaining an order or judgment in any court or other tribunal or (iii)
enforcing any order or judgment given or made in relation to such
Hirer's Document, the Hirer shall indemnify and hold harmless the Owner
from and against any loss suffered as a result of any difference
between (a) the rate of exchange used for such purpose to convert the
sum in question from the first currency into the second currency and
(b) the rate or rates of exchange at which the Owner may in the
ordinary course of business purchase the first currency with the second
currency upon receipt of a sum paid to it in satisfaction, in whole or
in part, of any such order, judgment, claim or proof. Any amount due
from the Hirer under this clause 9.6 shall be due as a separate debt
and shall not be affected by judgment being obtained for any other sums
due under or in respect of any of the Hirer's Documents and the term
"rate of exchange" includes any premium and costs of exchange payable
in connection with the purchase of the first currency with the second
currency.
10 COSTS AND INDEMNITIES
10.1 Ship related Expenses
<PAGE> 26
The Hirer shall pay promptly all costs or expenses of, or arising from,
the purchase, delivery, import, export, registration, classification,
ownership, possession, control, use, management, manning, victualling,
the provision of bunkers and lubricating oils, chartering,
sub-chartering, insurance, maintenance, repair, dry-docking, survey,
refurbishment, service, overhaul, modification, change, alteration,
loss, damage, storage, laying-up, removal, redelivery, sale or disposal
of, in or to the Ship, and all costs or expenses otherwise arising in
connection with the Ship or the performance of the Hirer's obligations
under this Agreement or any of the other Hirer's Documents including
the Management Agreement.
10.2 Duties and Similar Taxes
The Hirer shall pay all stamp, documentary, registration or other like
duties or Taxes (including any such Taxes payable by the Owner) imposed
on or in connection with any of the Relevant Documents and shall
indemnify the Owner against any liability arising by reason of any
delay or omission by the Hirer to pay such duties or Taxes.
10.3 Transaction related Expenses and Fee
Whether or not the Ship is delivered to the Hirer pursuant to this
Agreement, the Hirer shall pay to the Owner on demand:
(a) all expenses (including legal, advisory, printing, and
out-of-pocket expenses) incurred by the Owner in connection with
the negotiation, preparation, and execution of the Relevant
Documents, and of any amendment or extension of, or the granting
of any waiver or consent under, any of the Relevant Documents;
and
(b) all expenses (including legal, survey and other costs) incurred
by the Owner in contemplation of, or otherwise in connection
with, the enforcement of, or preservation of any rights under,
the Relevant Documents, or otherwise in respect of moneys owing
under the Relevant Documents, or in respect of breach of any
representation, warranty, covenant, agreement, condition or
stipulation therein contained, or in respect of the repossession
of the Ship;
and the Hirer shall furthermore pay to the Owner on Delivery of the
Vessel an arrangement fee of US$156,500.
All expenses payable pursuant to this clause 10.3 shall be paid
together with any Value Added Tax or similar tax thereon, and in the
currency in which the same are incurred by the Owner.
10.4 Indemnity for non-Payment by Hirer
The Hirer shall indemnify and hold harmless the Owner, without
prejudice to any of the Owner's other rights under any of the Relevant
Documents, from and
<PAGE> 27
against (to the extent that the Owner has not already been compensated
pursuant to the provisions of clause 10.3):
(a) any costs or expenses which the Hirer has agreed to pay and which
shall be claimed from or assessed against or paid by the Owner,
and against any liability incurred by the Owner by reason of any
delay or failure of the Hirer to pay any such costs or expenses;
and
(b) any Taxes which the Hirer has agreed to pay and which shall
nevertheless be claimed from or assessed against or paid by the
Owner, and against any liability incurred by the Owner by reason
of any delay or failure of the Hirer to pay any such Taxes
including, without limitation, any delay or failure of the Hirer
to make any such deduction or withholding as is referred to in
clause 12.3 or by reason of any increased payment as is referred
to in clause 12.3 not being made on the due date for such
payment.
10.5 Indemnities relating to the Ship
Without prejudice to the Hirer's obligations under clauses 10.1 to 10.4
inclusive, the Hirer agrees at all times, whether before, during or
after the Hire Period, to indemnify and hold harmless the Owner from
and against all costs, expenses, payments (other than the expenditure
of an amount up to the Total Expenditure Amount pursuant to the Sale
and Purchase Agreement and the Equipment Sale Agreement and the
payments made by the Owner under clauses 2.3 and 2.4 but including any
payments, costs and expenses pursuant to the Upgrade Contract and the
Supply Contracts, charges, losses, demands, liabilities, claims,
actions, proceedings, (whether civil or criminal) penalties, fines,
damages, judgments, orders or other sanctions, liens, salvage, general
average (in this clause 10.5 together referred to as "Losses") which
may be incurred by, or made or asserted against, the Owner at any time
whether relating to the period before or after Delivery (other than
losses resulting from a default of the Owner under the terms of this
Agreement):
(a) relating to, or arising directly or indirectly in any manner or
for any cause or reason whatsoever out of, the design, nature,
description, manufacture, construction, purchase, delivery,
import, export, registration, flag, classification,
certification, ownership, possession, control, use, management,
operation, manning, crewing, navigation, victualling, supply or
servicing (whether at sea or not), provision of bunkers and
lubricating oils, chartering, sub-chartering, insurance,
maintenance, repair, overhaul, dry-docking, surveys,
refurbishment, upgrade, condition, service, overhaul,
modification, change, alteration, loss, damage, storage, laying
up, removal, re-delivery, sale or disposal of, in or to the Ship,
or otherwise in connection with the Ship or which arise out of
the use or operation of any other vessel owned by or chartered to
the Hirer or other company associated with the Hirer or which
arise out of any other claims of whatsoever nature made against
the Hirer or other company associated with the Hirer, or relating
to loss or
<PAGE> 28
destruction of or damage to any property, or death or injury of,
or other loss of whatsoever nature suffered by, any person caused
by, relating to, or arising from or out of (in each case whether
directly or indirectly) any of the foregoing matters;
(b) which may at any time be made or brought on the ground that any
design, article or material in the Ship or the operation or use
thereof constitutes an infringement of patent, intellectual
property right or any other right whatsoever;
(c) in preventing or attempting to prevent the arrest, confiscation,
seizure, taking in execution, impounding, forfeiture or detention
of the Ship, or in securing the release of the Ship;
(d) as a consequence of any default in payment by the Hirer of any
sum under any of the Hirer's Documents when due or any other
default by the Hirer in the due and punctual performance of its
obligations under any of the Hirer's Documents (to the extent
that the Owner has not already been compensated pursuant to the
provisions of clause 9.6 or 10.4)
Any amounts payable pursuant to this clause 10.5 shall be paid together
with any Value Added Tax or similar tax thereon, and in the currency in
which the same are incurred by the Owner.
10.6 Survival of Indemnities
Notwithstanding anything to the contrary contained in this Agreement
and without prejudice to any right to damages or other claim which the
Hirer may have at any time against the Owner under this Agreement, the
indemnities by the Hirer in favour of the Owner contained in this
Agreement and the other Hirer's Documents shall continue in full force
and effect notwithstanding any breach of the terms of this Agreement
(including any fundamental or repudiatory breach) by the Owner or the
Hirer or any of the other Hirer's Documents, the termination of the
letting of the Ship to the Hirer under this Agreement, the repudiation
by the Owner or the Hirer of this Agreement, or the expiration or
termination of the Hire Period by effluxion of time or otherwise.
10.7 Interest on Indemnity Payments
Moneys becoming due by the Hirer to the Owner under the indemnities
contained in this clause 10 or elsewhere in this Agreement or any of
the other Hirer's Documents shall be paid on demand made by the Owner
and shall be paid together with interest thereon at the Relevant Rate
of Interest from the date of demand by the Owner to the date of
reimbursement by the Hirer to the Owner (after as well as before
judgment).
11 SURETY
11.1 In consideration of the Owner letting and selling the Ship to the Hirer
in terms of this Agreement, the Surety hereby irrevocably and
unconditionally guarantees to
<PAGE> 29
pay to the Owner, on demand by the Owner all moneys and discharge all
obligations and liabilities now or hereafter due, owing or incurred by
the Hirer to the Owner under or pursuant to this Agreement and the
Hirer's Documents when the same become due for payment or discharge
whether by acceleration or otherwise, and whether such moneys,
obligations or liabilities are express or implied, present, future or
contingent, joint or several, incurred as principal or surety
originally owing to the Owner or otherwise acquired by it, denominated
in Dollars or in any other currency or in any other manner whatsoever
and undertakes that if for any reason the Hirer shall fail to pay any
such sum on its due date, the Surety shall immediately on demand by the
Owner unconditionally pay such sum to the Owner.
11.2 The Surety's liability under this Agreement shall not be discharged,
reduced or otherwise affected in any way by reason of (i) the Owner
giving the Hirer time or any other concession, (ii) any composition,
discharge, release or other variation of liability entered into with,
or granted to, the Hirer, (iii) the Owner taking, holding, varying,
realising and not enforcing any other security for the liabilities of
the Hirer under this Agreement or the Hirer's Documents, (iv) any
amendment, variation or waiver (however fundamental) of any provision
of this Agreement or the Hirer's Documents, (v) any legal limitation or
incapacity relating to the Hirer, (vi) the invalidity or
unenforceability of the obligations of the Hirer under this Agreement
or the Hirer's Documents or (vii) any other act or omission of the
Owner or any other circumstances which, but for this provision, might
discharge the Surety.
11.3 The Surety agrees to pay interest on each amount demanded of it under
this clause 11 from the date of demand until payment (as well after as
before judgment) at the Relevant Rate of Interest calculated on day to
day basis. Such interest shall be compounded monthly if not paid on
demand but without prejudice to the Owner's right to require payment of
such interest.
11.4 The obligations of the Surety under this clause 11 shall continue in
effect until all sums whatsoever payable by the Hirer under this
Agreement have been finally paid in full, notwithstanding any
intermediate payment, partial settlement or other matter and will
survive the termination of this Agreement.
11.5 The Surety shall make all payments hereunder to the Owner in full,
without set-off or counterclaim and free and clear of any deductions or
withholdings provided that if at any time the Surety is required by law
to make any deduction or withholding in respect of any taxes, duties or
other charges or withholdings from any payment due hereunder, the sum
due from the Surety in respect of such payment shall be increased to
the extent necessary to ensure that, after the making of such deduction
or withholding, the Bank receives on the due date and retains a net sum
equal to the sum which it would have received had no such deduction or
withholding been required to be made.
12 TAXATION
12.1 General
<PAGE> 30
The Hirer shall pay promptly all Taxes levied or assessed on or in
respect of the Ship, any payments made under this Agreement or any of
the other Hirer's Documents or any of the transactions contemplated by
any of the Hirer's Documents but, subject to the remaining provisions
of this clause 12, excluding any Taxes assessed against the Owner by
reference to its overall profits, or by reference to its gains, if any,
realised in connection with the ultimate disposal of the Ship or
arising out of a Total Loss.
12.1 Gross-up of Indemnity Payments
(a) Sums payable to the Owner by the Hirer under this Agreement or
any of the other Hirer's Documents by way of indemnity or
reimbursement shall be calculated on an after-tax basis.
Accordingly, if and to the extent that any such sum payable to
the Owner is taxable in the hands of the Owner (as the Auditors
acting as experts and not as arbitrators shall certify from time
to time) such sum shall be increased to an amount which (after
subtracting any Taxation suffered by the Owner on the increased
payment and after taking into account any deduction for Taxation
purposes available to the Owner in respect of the discharge by
the Owner of any corresponding liability to a third party) shall
equal the amount which the Owner would have received had the sum
payable by the Hirer not been taxable in the hands of the Owner.
If the sum payable by the Hirer is initially paid on the basis
that it is not taxable in the hands of the Owner and it is
subsequently determined to be taxable or vice versa, such
adjustment and payment shall be made between the Owner and the
Hirer as the Auditors (acting as experts and not as arbitrators)
shall certify as appropriate to restore the after-tax position of
the Owner to that which it would have been had the adjustment not
been necessary.
(b) If and to the extent that any sum (the "indemnity sum")
constituting (directly or indirectly) an indemnity to the Owner
but paid by the Hirer to any person other than the Owner, shall
be treated as taxable in the hands of the Owner, the Hirer shall
pay to the Owner such sum (the "compensating sum") as (after
subtracting any Taxation suffered by the Owner on the
compensating sum and after taking into account any deductions for
the purposes of Taxation available to the Owner in respect of any
corresponding payment treated as made by the Owner to such
person) shall reimburse the Owner for any Taxation suffered by it
in respect of the indemnity sum.
(c) For the purposes of this clause 12.2 a sum shall be deemed to be
taxable in the hands of the Owner if it falls to be taken into
account in computing the profits or gains of the Owner for the
purposes of Taxation and if so the Owner shall be deemed to have
suffered Taxation thereon at the rate of Taxation applicable to
the Owner's profits or gains for the period in which the payment
falls to be taken into account for the purposes of such Taxation.
12.3 Withholding Taxes
<PAGE> 31
(a) If at any time any applicable law, regulation or regulatory
requirement, or any governmental authority, monetary agency or
central bank requires the Hirer to make any deduction or
withholding in respect of Taxes from any payment due to the Owner
under this Agreement or any of the other Hirer's Documents:
(i) the sum due from the Hirer in respect of such payment shall
be increased to the extent necessary to ensure that, after
the making of such deduction or withholding, the Owner
receives on the due date for such payment a net sum equal
to the sum which it would have received had no such
deduction or withholding been required to be made;
(ii) the Hirer shall pay to the relevant authority within the
period for payment permitted by applicable law the full
amount of the deduction or withholding (including, but
without prejudice to the generality of the foregoing, the
full amount of any deduction or withholding from any
increased amount paid pursuant to this clause 12.3); and
(iii) the Hirer shall furnish to the Owner within the period for
payment permitted by applicable law, evidence of payment to
the relevant authority of all amounts deducted or withheld
as aforesaid.
(b) If following any such deduction or withholding as is referred to
in clause 12.3(a) from any payment by the Hirer, the Owner shall
receive or be granted a credit against or remission for any Taxes
payable by it, the Owner shall, subject to the Hirer having made
any increased payment in accordance with clause 12.3(a)(i) and to
the extent that the Owner can do so without prejudicing the
retention of the amount of such credit or remission and without
prejudice to the right of the Owner to obtain any other relief or
allowance which may be available to it, reimburse the Hirer with
such amount as the Owner shall in its absolute discretion certify
to be the proportion of such credit or remission as will leave
the Owner (after such reimbursement) in no worse position that it
would have been in had there been no such deduction or
withholding from the payment by the Hirer as aforesaid. Such
reimbursement shall be made forthwith upon the Owner certifying
that the amount of such credit or remission has been received by
it. Nothing contained in this Agreement shall oblige the Owner to
rearrange its tax affairs or to disclose any information
regarding its tax affairs and computations. Without prejudice to
the generality of the foregoing, the Hirer shall not, by virtue
of this clause 12.3(b), be entitled to enquire about the Owner's
tax affairs.
12.4 Non-Deductibility
If the Owner is required to pay any sum to the Hirer under this
Agreement or any of the other Hirer's Documents and such sum is payable
out of or represents a
<PAGE> 32
reimbursement of an amount which is brought into account in computing
the profits or gains of the Owner for the purposes of Taxation and such
payment will not be allowed to the Owner as a deductible trading
expense or as a basis for, or otherwise as, a deduction or off-set for
Taxation purposes in the accounting period of the Owner in which it is
required to be paid (as the Auditors acting as experts and not as
arbitrators shall certify from time to time), the Hirer shall pay to
the Owner such amount as shall put the Owner in the same after-tax
position as the Owner would have been in had the payment been allowed
as a deductible trading expense or as a basis for, or otherwise as, a
deduction or set-off as aforesaid. If any such payment is initially
made on the basis that it is a deductible trading expense, or that it
will be allowed as a basis for, or otherwise as, a deduction or set-off
of the Owner for Taxation purposes in the accounting period of the
Owner in which it is incurred and it is subsequently determined that it
is not so deductible or allowed, or vice versa, such adjustments and
payments, if any, shall be made between the Owner and the Hirer as the
Auditors from time to time (acting as experts and not as arbitrators)
may certify as appropriate in order to restore the after-tax position
of the Owner to that which it would have been had the adjustment not
been necessary.
13 GENERAL UNDERTAKINGS
13.1 Information and Compliance Undertakings
Each of the Hirer and the Surety undertakes with the Owner that it
will:
(a) Notification of Relevant Event
promptly inform the Owner of any occurrence of which it becomes
aware which is likely to adversely affect any Relevant Party's
ability to perform its obligations under any of the Relevant
Documents and, without limiting the generality of the foregoing,
will inform the Owner of any Relevant Event forthwith upon
becoming aware thereof;
(b) Consents and Authorisations
without prejudice to clauses 3 and 5, obtain or cause to be
obtained, maintain in full force and effect and comply in all
material respects with the conditions and restrictions (if any)
imposed in, or in connection with, every consent, authorisation,
licence or approval of governmental or public bodies or
authorities or courts and do, or cause to be done, all other acts
and things, which may from time to time be necessary or desirable
under applicable law for the continued due performance of all of
any Relevant Party's obligations under each of the Relevant
Documents;
(c) Preparation of Accounts
cause to be prepared financial statements of the Hirer in
accordance with generally accepted accounting principles and
practices in the United
<PAGE> 33
Kingdom consistently applied in respect of each financial year as
well as an annual audited consolidated financial statements
schedule (in a form previously approved by the Owner) in respect
of the Corporate Guarantors, the Hirer and the Surety and cause
the same to be certified by its auditors and prepare an unaudited
consolidated financial statements schedule in a form agreed in
advance with the Owner in respect of each quarter in respect of
the Hirer, the Surety and the Corporate Guarantors and deliver as
many copies of the same as the Owner may reasonably require as
soon as practicable, but not later than 270 days (in the case of
audited financial statements and any audited annual consolidated
financial statements schedule) or 45 days (in the case of
unaudited quarterly financial statement schedules) after the end
of the financial period to which they relate;
(d) Supply of Information
deliver to the Owner as many copies as the Owner may reasonably
require of every report, circular, notice or like document,
issued by the Hirer or the Surety to its shareholders or
creditors generally, in each case at the time of issue thereof;
(e) Supply of Further Information
provide the Owner with such financial and other information
concerning the Hirer and the Surety and their respective affairs
as the Owner may from time to time reasonably require;
(f) Information concerning the Ship
furnish the Owner promptly with all such information as it may
from time to time reasonably require regarding the Ship, her
insurance, condition, maintenance, employment, position and
engagements, particulars of all towages and salvages, and copies
of all charters and other contracts for her employment, or
otherwise howsoever concerning her;
(g) Observance of Covenants
duly and punctually perform each of its obligations under the
Hirer's Documents; and
(h) ensure that its obligations under this Agreement and the other
Hirer's Documents shall, without prejudice to the provisions of
clause 13.1(i), at all times rank at least pari passu with all
its other present and future unsecured and unsubordinated
Indebtedness;
<PAGE> 34
(i) Negative undertakings
Not, for so long as any moneys are owing under this Agreement
or any of the Hirer's Documents, without the prior written
consent of the Owner:
(a) Negative pledge
permit:
(i) any Encumbrance to subsist, arise or be created or extended
over all or any part of its present or future undertakings,
assets, rights or revenues to secure any present or future
Indebtedness of itself or any other person; or
(ii) any of its Indebtedness to be guaranteed or otherwise
assured against financial loss by any person other than
itself or the Corporate Guarantors under the Corporate
Guarantee,
unless:
(A) such Encumbrance is in favour of Bank One Texas NA (for as
long as that bank is principal banker to the group of
companies to which the Hirer and the Surety both belong) or
is in favour of the financier of a specific asset, created
over that specific asset, and standing as security for no
more than the facility advanced by that financier to
facilitate the purchase of that asset; or
(B) such Encumbrance or the benefit of such guarantee or other
assurance, or such other security or guarantee or other
assurance as the Owner considers equivalent thereto, is at
the same time, or within such period as the Owner may
approve, extended equally and rateably to the obligations
of the Hirer and the Surety under this Agreement and the
Hirer's Documents to the satisfaction of the Owner;
(b) No merger
merge or consolidate with any other company or person; and
(c) Disposals
sell, transfer, lend or otherwise dispose of or cease to exercise
direct control over any part (being either alone or when
aggregated with all other disposals falling to be taken into
account pursuant to this clause 13.1(i)(c) material in the
opinion of the Owner in relation to the undertakings, assets,
rights and revenues of the Hirer or, as the case may be, the
Surety and all Group Companies taken as a whole) of its present
or future
<PAGE> 35
undertaking, assets, rights or revenues (otherwise than by
transfers, sales or disposals for full consideration in the
ordinary course of trading) whether by one or a series of
transactions related or not but excluding any transfers of
undertakings, assets, rights and revenues between Group
Companies.
13.2 Security Cover
(a) Valuations
The Hirer hereby undertakes with the Owner that it will, on a
date being twenty one (21) days before each anniversary of the
Delivery Date during the Hire Period, cause the Ship to be valued
in Dollars by an independent firm of shipbrokers nominated by the
Hirer and approved by the Owner or, failing such nomination or
approval, appointed by the Owner in its sole discretion (each
such valuation to be made without, unless required by the Owner,
physical inspection, and on the basis of an arms-length
transaction between willing buyer and willing seller without
taking into account any charterparty), and to cause the relevant
firm of shipbrokers to deliver to the Owner its aforesaid
valuation in writing addressed to the Owner. All costs arising in
connection with obtaining any such valuations (including, but
without limitation, the fees of the relevant firm of shipbrokers
appointed to give such valuation) shall be borne by the Hirer.
(b) Additional Security
In the event that, on the basis of any valuation of the Ship
(obtained pursuant to clause 13.2(a)) it is demonstrated that
after deducting the balance standing to the credit of the Cash
Collateral Account from the Capital Outstanding, (the resulting
sum being the Net Capital Outstanding) the value of the Ship is:
(i) less than one hundred and forty per cent (140%) of the Net
Capital Outstanding as at the first anniversary of the
Delivery Date or is less than one hundred and fifty per
cent (150%) of the Net Capital Outstanding as at each
successive anniversary of the Delivery Date, then in such
case the Owner shall be entitled to require the Hirer
within a period of thirty (30) days following receipt by
the Hirer of written notice from the Owner notifying the
Hirer of such shortfall and specifying the amount thereof
(which amount shall, in the absence of manifest error, be
conclusive and binding upon the Hirer) to furnish the Owner
with such additional cash security (paid to the Cash
Collateral Account) in an amount not less than the amount
so specified; or
(ii) more than one hundred and forty per cent (140%) of the Net
Capital Outstanding as at the first anniversary of the
Delivery Date or is more than one hundred and fifty per
cent (150%) of the
<PAGE> 36
Net Capital Outstanding as at each successive anniversary
of the Delivery Date then in such case the Owner shall,
provided that no Relevant Event has occurred, release to
the Hirer or the Hirer's order the excess cash security
amount over one hundred and forty percent (140%) of the Net
Capital Outstanding or one hundred and fifty percent (150%)
of the Net Capital Outstanding as the case may be, standing
to the balance of the Cash Collateral Account, provided
always that the following minimum deposit amounts are
maintained in the Cash Collateral Account;
(A) a minimum balance of four million Dollars
(US$4,000,000) on the first anniversary of the
Delivery Date until the second anniversary of the
Delivery Date;
(B) a minimum balance of three million Dollars
(US$3,000,000) on the second anniversary of the
Delivery Date until the third anniversary of the
Delivery Date;
(C) a minimum balance of two million Dollars
(US$2,000,000) on the third anniversary of the
Delivery Date until the fourth anniversary of the
Delivery Date; and
(D) a minimum balance of one million Dollars
(US$1,000,000) on the fourth anniversary of the
Delivery Date until the fifth anniversary of the
Delivery Date.
13.3 Protection of Owner's Rights
The Hirer hereby further undertakes with the Owner that throughout the
Hire Period it will:
(a) Disposal of the Ship
not attempt or hold itself out as having any power to sell, agree
to sell other than following exercise of the option under Clause
31.1, transfer or otherwise dispose of or abandon the Ship, or
any share or interest therein. The Hirer acknowledges that it has
no right to sell the Ship;
(b) Encumbrances
not create or agree or purport to create any Encumbrance over the
Ship, any share or interest therein or in the Sub-Earnings or in
the Insurances or Requisition Compensation or any part thereof
(other than for Permitted Encumbrances). The Hirer acknowledges
that it has no right to mortgage the Ship;
<PAGE> 37
(c) Notification of arrest
notify the Owner promptly by telex of any arrest or detention of
the Ship or any exercise or purported exercise of a lien or other
claim on the Ship or the Sub-Earnings or the Insurances or any
part thereof;
(d) Prevention of and release from arrest
promptly pay and discharge all debts, damages, liabilities and
outgoings whatsoever which have given or may give rise to
maritime, statutory or possessory liens on, or claims enforceable
against, the Ship, the Sub-Earnings or the Insurances or any part
thereof and, in the event of a writ or libel being filed against
the Ship or the Sub-Earnings or the Insurances or any part
thereof, or of any of the same being arrested, attached or levied
upon pursuant to legal process or purported legal process or in
the event of detention of the Ship in exercise or purported
exercise of any such lien or claim as aforesaid, procure the
release of the Ship, the Sub-Earnings and the Insurances from
such arrest, detention, attachment or levy or, as the case may
be, the discharge of the writ or libel within five (5) Business
Days of receiving notice thereof by providing bail or procuring
the provision of security or otherwise as the circumstances may
require;
(e) No pledging of Owner's Credit
not pledge the credit of the Owner for any maintenance, service,
repairs, drydocking, or modifications to, or changes or
alterations in, the Ship or for any other purpose whatsoever;
(f) Protection of Owner's Rights in the Ship
not do or permit to be done any act or thing which might
jeopardise the title, rights and interest of the Owner in the
Ship and/or omit or permit to be omitted to be done any act which
might prevent that title and those rights and interest from being
jeopardised; and
(g) Notice of Owner's Rights
generally on all occasions when the ownership of the Ship is
relevant make clear to third parties (including the contractors
under the Upgrade Contract and all suppliers under the Supply
Contracts) that the same is the property of the Owner.
14 SUB CHARTERING
14.1 Restrictions on Sub-Chartering
Except pursuant to the Sub-Charter, the Hirer will not, at any time
without the prior written consent of the Owner (which the Owner shall
have full liberty to withhold) and, if such consent is given, only
subject to such conditions as the
<PAGE> 38
Owner may impose, part with the possession or operational control of
the Ship (except to the Manager pursuant to the Management Agreement or
for the purpose of maintenance, service, repair or overhaul work or any
modifications, changes or alterations permitted under this Agreement
including any work required under the terms of the Upgrade Contract or
the Supply Contracts) or sub-let the Ship other than in accordance with
the terms of the Sub Charter;
14.2 Undertakings concerning Sub-Charter and Sub-Earnings
The Hirer hereby undertakes with the Owner that throughout the Hire
Period it will:
(a) Sharing of Sub-Earnings
save in respect of the Bank One Assignment, not without the prior
written consent of the Owner (and then only subject to such
conditions as the Owner may impose) enter into any agreement or
arrangement whereby the Sub-Earnings may be shared with any other
person; and
(b) Assignment of Sub-Earnings
notwithstanding anything to the contrary contained in this
Agreement in the event that a Sub Charter is proposed to be
entered into (i) procure the prior written consent of the Owner
to the terms and conditions of the proposed Sub-Charter, (ii)
obtain from Bank One, Texas N.A. all the necessary releases and
consents required by the Owner for such an assignment, including
but not limited to a release from the Bank One Assignment and
(iii) execute on demand an assignment of the Sub-Earnings in
relation to that proposed Sub-Charter in favour of the Owner on
terms and conditions determined by the Owner; and
(c) Information relating to Sub-Earnings
supply to the Owner all information, accounts and records that
may be necessary or of assistance to enable the Owner to verify
the amount of Sub-Earnings.
15 USE AND TRADE OF THE SHIP
15.1 Permitted Use
Subject to the other terms and conditions of this Agreement and the
other Hirer's Documents, the Hirer shall have the full and exclusive
use, control, possession and command of the Ship during the Hire Period
and may operate the Ship or employ her throughout the world in any
lawful trade for which she is suitable.
15.2 Undertakings concerning Use
The Hirer hereby undertakes with the Owner that throughout the Hire
Period it will:
<PAGE> 39
(a) Ship Registration
not do or suffer to be done anything whereby the documentation of
the Ship for the time being in accordance with the provisions of
clause 16.2 may be forfeited or imperilled;
(b) Employment
not employ the Ship or permit her employment in any manner, trade
or business which is forbidden by international law, or which is
unlawful or illicit under the law of any relevant jurisdiction,
or in carrying illicit or prohibited goods, or in any manner
whatsoever which may render her liable to condemnation in a prize
court, or to destruction, seizure, confiscation, penalty or
sanctions and, in the event of hostilities in any part of the
world (whether war be declared or not), not employ the Ship or
permit her employment in carrying any contraband goods, or enter
or trade to or continue to trade in any zone which is declared a
war zone by any government or by the Ship's war risks insurers
unless the prior written consent of the Owner is obtained and
such special insurance cover as the Owner may require shall have
been effected by the Hirer and at its expense;
(c) Payment of Outgoings and Evidence of Payments
pay all tolls, dues and other outgoings whatsoever in respect of
the Ship, the Sub-Earnings and the Insurances and keep proper
books of account in respect of the Ship and the Sub-Earnings and,
as and when the Owner may so require, make such books available
for inspection on behalf of the Owner, and furnish satisfactory
evidence that the wages and allotments and the insurance and
pension contributions of the Master and crew are being promptly
and regularly paid and that all deductions from crew's wages in
respect of any tax liability are being properly accounted for and
that the Master has no claim for disbursements other than those
incurred by him in the ordinary course of trading on the voyage
then in progress;
(d) Operation in the USA or Canada
give the Owner at least ten (10) Business Days prior written
notice if the Ship is to be operated in or into or offshore from
the United States of America or Canada, and prior to the
commencement of such operation, to increase the amount of
protection and indemnity, pollution risks and other legal
liability insurance referred to in clause 18.1(a) to such amount
as the Owner may reasonably require;
(e) Anti-Drug Abuse
without prejudice to clause 15.2(b), take all reasonable
precautions to prevent any infringements of the Anti-Drug Abuse
Act of 1986 of the
<PAGE> 40
United States of America or any similar legislation applicable to
the Ship in any jurisdiction in or to which the Ship shall be
employed or trade;
(f) Bills of Lading
procure that all Bills of Lading issued for carriage of goods by
the Ship shall contain a Paramount clause incorporating any
legislation relating to carrier's liability for cargo
compulsorily applicable in the trade or, if no such legislation
exists, that such Bills of Lading shall incorporate the British
Carriage of Goods by Sea Act 1971 and that all such Bills of
Lading shall also contain the amended New Jason clause and the
Both-to-Blame Collision clause and, without prejudice to
provisions of clause 33.5, provide that General Average, if any,
shall be settled according to the York-Antwerp Rules of 1990 in
London.
16 TITLE, REGISTRATION, NAME AND HOUSE FLAG
16.1 Title
Title to the Ship shall remain vested in the Owner. The Hirer shall
have no right, title or interest in or to the Ship or any part thereof
except the right to use the same upon the terms and conditions
contained in this Agreement. Subject to clause 7.1, nothing herein
contained shall be construed as imposing any liability on the Owner to
the Hirer in respect of or arising out of the acts or omissions of any
third party (including any charterer or lessee of any other vessel or
assets of the Owner) affecting the Hirer or the Ship or otherwise.
16.2 Registration
Not later than Delivery the Hirer shall take, at its expense, all
necessary steps to register the Owner as the registered owner of the
Vessel under the laws and flag of the Bahamas in the name of the Owner
and thereafter shall during the Hire Period do all that may be
necessary on its part to maintain such registration in force. The Owner
shall, at the expense of the Hirer, co-operate to register itself as
the registered owner of the Vessel under the laws and flag of the
Bahamas.
16.3 Name and House Flag
The name of the Vessel may be changed by the Hirer at its expense, to
such name as the Hirer shall select and the Owner may agree (such
agreement not to be unreasonably withheld) and such name shall
thereafter be and remain the name of the Vessel and the Vessel shall be
painted in such colours, display such funnel insignia and fly such
house flag as the Hirer may require. The Hirer shall notify the Owner
of any intended change in the name of the Vessel. The Owner shall at
the expense of the Hirer, co-operate in the registration of any change
of name at the Bahamian Maritime Authority.
17 MAINTENANCE AND OPERATION
17.1 Possession and Control of Ship by Hirer
<PAGE> 41
During the Hire Period the Ship shall, subject to the terms and
conditions of this Agreement, be in the full and exclusive possession
and at the absolute disposal of the Hirer for all purposes and under
its complete control in every respect and the Master, officers and crew
of the Ship shall be the servants of the Hirer for all purposes
whatsoever.
Notwithstanding any other provision of this Agreement, without
prejudice to any of the obligations of the Hirer under this Agreement
or any of the other Hirer's Documents imposing any higher standard of
performance upon the Hirer, the Hirer shall make, and shall have sole
responsibility for making, all such arrangements as may be necessary to
ensure that the Ship is fit to go to sea without serious danger to
human life.
17.2 Undertakings concerning Maintenance and Operation
The Hirer further undertakes with the Owner that throughout the Hire
Period it will:
(a) Maintenance of Classification; Compliance with Regulations
maintain the Classification as the present class of the Ship with
the Classification Society with such other certificates required
by statute and the Ship's insurers in force at all times and so
as to comply with and ensure that the Ship at all times complies
with the provisions of all laws and the provisions of all other
regulations and requirements (statutory or otherwise) from time
to time applicable to vessels registered in the Bahamas or
otherwise applicable to the Ship, her Master, officers and crew
wherever the Ship may proceed or trade and (without prejudice to
the generality of the foregoing) at its own expense maintain in
force for the Ship all safety, radio, loadline and other
certificates whatsoever and all licences and permits which may
from time to time be prescribed by any legislation in force in
the Bahamas or other applicable jurisdiction;
(b) Supply and Crewing
by its own procurement or that of the Manager, man, victual,
navigate, operate, supply, fuel, and repair the Ship whenever
required during the Hire Period;
(c) Surveys
submit the Ship to continuous surveys and such periodical or
other surveys as may be required for classification purposes,
comply with all recommendations and requirements of the
Classification Society in accordance with their terms and, upon
the Owner's request, supply to the Owner copies of all survey
reports issued in respect thereof;
(d) Repair
<PAGE> 42
keep the Ship and every part of her in a good and efficient state
of repair, in efficient operating condition, seaworthy in all
respects and in accordance with good maintenance practice (fair
wear and tear excepted and having regard to the type and age of
the Ship) and procure that all repairs to, or replacement of, any
damaged, worn or lost parts or equipment are effected in such
manner (both as regards workmanship and quality of materials) as
not to diminish the value of the Ship;
(e) Drydocking
drydock the Vessel and clean and paint her underwater parts in
accordance with good commercial practice for vessels of the type
and age of the Vessel and, in any event, in accordance with the
requirements of the Classification Society;
(f) Inspection of the Ship
permit the Owner by surveyors or other persons appointed by it
for such purpose to board the Vessel and permit or procure the
Owner to enter upon the premises where Equipment may be stored,
at all reasonable times for the purpose of inspecting the Ship
and afford all proper facilities for such inspections and for
this purpose give the Owner reasonable advance notice of any
intended drydocking of the Vessel (whether for the purpose of
classification, survey or otherwise). The cost of such
inspections and surveys shall be paid by the Hirer provided
however that where the Owner requests an inspection within a
period of twelve (12) months from a previous inspection and the
inspection shows that the Hirer is not in breach of any of the
provisions of this Agreement, the cost of such inspection shall
be paid by the Owner. All time taken in respect of such
inspection or survey shall form part of the Hire Period. All
inspections and surveys of the Ship shall be carried out at such
times and places and in such manner as not to interfere with the
use and operation of the Ship but the Owner shall not be obliged
to carry out such inspections only during periods of drydocking;
(g) Manuals and Technical Records
maintain all such other records, logs, manuals, technical data
and other materials and documents which are required to be
maintained in respect of the Ship to comply with any applicable
laws or the requirements of the Classification Society and keep
accurate, complete and up to date logs and records of all voyages
made by the Ship and of all maintenance, repairs, alterations,
modifications and additions to the Ship and, on reasonable
advance notice from the Owner, permit the Owner or its
representatives at any time to examine and take copies of such
logs and records and other records;
<PAGE> 43
(h) Information regarding Casualties
furnish the Owner with full information regarding any single
casualty or other accident or damage to the Ship which may
involve repairs costing more than the Casualty Amount;
(i) Modification; Removal of Parts; Equipment owned by Third Parties
not without the prior written consent of the Owner (and then only
on and subject to such terms as the Owner may agree):
(i) make any modification to the Ship in consequence of which
her structure, type or performance characteristics could or
might be materially altered or her value materially reduced
(other than in accordance with the Upgrade Contract; or
(ii) remove any material part of the Ship or any equipment
(other than the Excluded Equipment) the value of which is
such that its removal from the Ship would materially reduce
the value of the Ship without replacing the same with
equivalent parts or equipment which are owned by the Owner
free from Encumbrances (other than Permitted Encumbrances
and other than in accordance with the Upgrade Contract); or
(iii) install on the Ship any equipment owned by a third party
which cannot be removed without causing damage to the
structure or fabric of the Ship;
(j) Manager
not without the previous consent in writing of the Owner (and
then only on and subject to such terms as the Owner may agree)
appoint any manager of the Ship other than the Manager or to
terminate or amend the terms of the Management Agreement (and for
the purposes of this Agreement "manager" shall include any ship
manager or other person providing to the Hirer analogous
specialised services in respect of the Ship);
(k) Notification of certain events
notify the Owner forthwith of:
(i) any occurrence in consequence of which the Ship has or may
become a Total Loss;
(ii) any requisition of the Ship for hire;
(iii) any requirement or recommendation made by any insurer or
the Classification Society or by any competent authority
which is not complied with in accordance with its terms;
<PAGE> 44
(iv) any serious or potentially serious injury in an amount
exceeding US$100,000 to a third party caused by, or in
connection with, the Ship;
(v) any substantial damage in an amount exceeding US$100,000 to
property caused by, or in connection with, the Ship;
(vi) any assistance which has been given to the Ship which has
resulted or may result in a lien for salvage being acquired
over the Ship; and
(vii) any other event which occurs in connection with the Ship
which affects or might affect the rights of the Owner or
involves or might involve any material loss or liability;
(l) Repairers' Liens
not without the previous consent in writing of the Owner (and
then only on and subject to such terms as the Owner may agree)
put the Ship into the possession of any person for the purpose of
work being done upon her in an amount exceeding or likely to
exceed the Casualty Amount unless such person shall first have
given to the Owner and in terms satisfactory to it, a written
undertaking not to exercise any lien on the Ship or the
Sub-Earnings for the cost of such work or otherwise;
(m) Health and Safety
take such steps as are reasonably practicable to ensure that the
Ship and all constituent parts thereof will be safe and without
risk to health when properly used and specifically (without
prejudice to the generality of the foregoing) that it will:
(i) take such steps as are reasonably practicable to ensure
that any defects in the Ship and all constituent parts
thereof which could be or cause a danger to safety and/or a
risk to health shall be made good;
(ii) for such purpose, have a detailed inspection of the Ship
carried out from time to time including all electrical,
fluid, oil and gas connections (being either supplies to or
discharges from the Ship) and all constituent parts thereof
as well as all safety equipment;
(iii) take such action as is reasonably practicable to see that
appropriate safety measures are adopted; and
(iv) not use or permit the Ship or any constituent parts thereof
to be used beyond their limits and capacities;
(n) No operational interest
<PAGE> 45
procure that the Owner is not at any time represented as carrying
goods or passengers or providing any other service on or from the
Ship, or as being in any way connected or associated with any
operation of carriage or other service which may be undertaken by
the Hirer, or as having any operational interest in, or
responsibility for, the Ship;
(o) Safe Operation
take all reasonable steps to secure that the Ship is navigated
and operated in a proper, safe and seaman-like manner and in the
manner prescribed by any legislation in force in the Bahamas or
any other applicable jurisdiction;
(p) Fitness to go to Sea
procure that the Ship shall at all times be fit to go to sea
without serious danger to human life (by reason of the condition,
or the unsuitability for its purpose, of either the Ship or its
machinery or equipment or any part of the Ship or its machinery
or equipment or undermanning or overloading or unsafe or improper
loading or any other matter relevant to the safety of the Ship)
unless arrangements have been made which are appropriate to
ensure that before the Ship goes to sea it is made fit to do so
without serious danger to human life by reason of any such
matters or it is reasonable for such arrangements not to be made
at such time; and
(q) Compliance with Oil Pollution and Environmental Laws
do or cause to be done all things necessary to comply with all
national, international and state conventions and laws (and any
rules and regulations thereunder) applicable to the Owner and/or
the Hirer and/or the Ship including, without limitation, the
International Convention on Civil Liability for Oil Pollution
Damage, the Oil Pollution Act of 1990 of the United States of
America (including, without limitation, the requirements
thereunder relating to manning and the establishment of financial
responsibility), the Comprehensive Environmental Response
Compensation and Liability Act of the United States of America,
other federal and state laws of the United States of America and
international conventions, laws, rules and regulations relating
to environmental matters, including those relating to discharges
of oil, petroleum, petroleum products and distillates, chemicals,
pollutants and other substances.
18 INSURANCE UNDERTAKINGS; WRECK REMOVAL
18.1 Insurance Undertakings
The Hirer hereby covenants with the Owner and undertakes that
throughout the Hire Period it will:
(a) Insured Risks
<PAGE> 46
insure and keep the Ship insured free of cost and expense to the
Owner and in the joint names of the Hirer and the Owner (but
without liability on the part of the Owner for premiums or
calls):
(i) against fire and usual marine risks (including excess
risks) and war risks, on an agreed value basis or such
other basis as shall be agreed by the Owner, in such
amounts (but not in any event less than whichever shall be
the greater of (i) the market value of the Ship for the
time being and (ii) one hundred and ten per cent (110%) of
the maximum Termination Sum applicable during the period of
the policy) and upon such terms as shall from time to time
be approved in writing by the Owner;
(ii) against protection and indemnity risks (including pollution
risks) for the full value and tonnage of the Ship (as
approved in writing by the Owner) and upon such terms as
shall from time to time be approved in writing by the
Owner; and
(iii) in respect of such other matters of whatsoever nature and
howsoever arising in respect of which insurance would be
maintained by a prudent owner of the Ship having regard to
the financial resources and liabilities of the Hirer and to
the situation and method of operation of the Ship;
and that it will pay to the Owner the cost (as conclusively
certified by the Owner) of any innocent owner's insurance and
Additional Perils protection which the Owner may from time to
time effect in respect of the Ship upon such terms and in such
amounts (not exceeding one hundred and ten per cent (110%) of the
maximum Termination Sum applicable during the period of the
policy) as it shall deem desirable;
Provided that if at any time the Owner reasonably considers that
any change in circumstances may occur or has occurred which, in
the opinion of the Owner, may materially affect, or has
materially affected, the insurance of the Ship, then the Owner
shall be entitled (without prejudice to any other rights which it
may have or acquire under this Agreement), if in the reasonable
opinion of the Owner there is no other appropriate action to
prevent such material effect on the insurance of the Ship, to
require the Ship to remain at any safe port or to proceed to and
remain at any safe port designated by the Owner until the Owner
shall have implemented any amendments to the terms of such
insurance and any operational changes which the Owner considers
are required as a result of such change in circumstances;
(b) Brokers and Insurers
effect the insurances aforesaid in Dollars or such other currency
as the Owner may approve and through the Approved Brokers and
with such insurance companies and/or underwriters as shall from
time to time be
<PAGE> 47
approved in writing by the Owner provided however that the
insurances against war risks and protection and indemnity risks
may be effected by the entry of the Ship with such war risks and
protection and indemnity risks associations as shall from time to
time be approved in writing by the Owner;
(c) Fleet Cover
if any of the insurances referred to in clause 16.1 (a)(i) form
part of a fleet cover, procure that the Approved Brokers shall
undertake to the Owner that they shall neither set off against
any claims in respect of the Ship any premiums due in respect of
other vessels under such fleet cover or any premiums due for
other insurances, nor cancel the insurance for reason of
non-payment of premiums for other vessels under such fleet cover
or of premiums for such other insurances, and shall undertake to
issue a separate policy in respect of the Ship if and when so
requested by the Owner;
(d) Payment of Premiums
punctually pay all premiums, calls, contributions or other sums
payable in respect of all such insurances and to produce all
relevant receipts or other evidence of payment when so required
by the Owner;
(e) Renewal
at least fourteen (14) days before the relevant policies,
contracts or entries expire, notify the Owner of the names of the
brokers and/or the war risks and protection and indemnity risks
associations proposed to be employed by the Hirer for the
purposes of the renewal of such insurances and of the amounts in
which such insurances are proposed to be renewed and the risks to
be covered and, subject to compliance with requirements of the
Owner pursuant to this clause 18.1, procure that appropriate
instructions for the renewal of such insurances on the terms so
specified are given to the Approved Brokers and/or to the
approved war risks and protection and indemnity risks
associations and that the Approved Brokers and/or the approved
war risks and protection and indemnity risks associations will at
least seven (7) days before such expiry (or within such shorter
period as the Owner may from time to time agree) confirm in
writing to the Owner as and when such renewals have been effected
in accordance with the instructions so given;
(f) Guarantees
arrange for the execution and delivery of such guarantees or
indemnities as may from time to time be required by any
protection and indemnity or war risks association;
<PAGE> 48
(g) Custody of Policy Documents; Letters of Undertaking; Loss Payable
Clauses, Notices of Assignment
deposit with the Approved Brokers (or procure the deposit of) all
slips, cover notes, policies, certificates of entry or other
instruments of insurance from time to time issued in connection
with such of the insurances referred to in clause 18.1(a) as are
effected through the Approved Brokers and procure that the
interest of the Owner shall be endorsed thereon by incorporation
of the relevant Loss Payable Clause and by the issuing of the
Notice of Assignment duly signed by the Hirer and that the Owner
shall be furnished with pro forma copies thereof and a letter or
letters of undertaking from the Approved Brokers in such form as
shall from time to time be required by the Owner;
(h) Club Letters of Undertaking; Certificates of Entry
procure that any protection and indemnity and/or war risks
associations in which the Ship is for the time being entered
shall endorse the relevant Loss Payable Clause on the relevant
certificate of entry or policy and shall furnish the Owner with a
copy of such certificate of entry or policy and a letter or
letters of undertaking in such form as shall from time to time be
required by the Owner;
(i) Broker's Report
if so requested by the Owner, but at the cost of the Hirer,
furnish the Owner from time to time with a detailed report signed
by an independent firm of marine insurance brokers appointed by
the Owner dealing with the insurances maintained on the Ship and
stating the opinion of such firm as to the adequacy thereof;
(j) Collection
do all things necessary and provide all documents, evidence and
information to enable the Owner to collect or recover any moneys
which shall at any time become due in respect of the Insurances;
(k) Compliance with Insurances
comply with the terms and conditions of the Insurances, not do,
consent to or permit any act or omission which might invalidate
or render unenforceable the whole or any part of the Insurances
and not (without first obtaining the consent of the insurers to
such employment and complying with such requirements as to extra
premium or otherwise as the insurers may prescribe) employ the
Ship or suffer the Ship to be employed otherwise than in
conformity with the terms of the Insurances (including any
warranties express or implied therein);
(l) Application of Recoveries
<PAGE> 49
apply all sums receivable under the Insurances which are paid to
the Hirer in accordance with the Loss Payable Clauses and clause
23.6 in repairing all damage and/or in discharging the liability
in respect of which such sums shall have been received;
(m) Other Insurances and Assureds
not, without the prior written consent of the Owner, take out
additional insurances for the Hirer's sole benefit, or permit the
Hirer or the Owner to be named insured in insurances with respect
to the Ship or the Sub-Earnings, other than as required under
this Agreement, where such additional insurances will or may
prejudice the Insurances or recovery thereunder or will exceed
the amount permitted by the warranties or other conditions of the
Insurances (unless the insurers under the Insurances have
consented thereto) and will, upon the Owner's request,
immediately furnish the Owner with particulars of any such
additional insurances (including copies of any cover notes or
policies) and of the written consent of the insurers under the
Insurances in any case where such consent is necessary;
(n) Maintenance of Oil Pollution Insurance Cover
comply with all other requirements of the protection and
indemnity association with which the Ship is entered to ensure
that the Ship is fully covered for oil pollution risks;
(o) Evidence of Oil Pollution Insurance Cover
deliver to the Owner on demand at the expense of the Hirer
certified true copies of all declarations to the protection and
indemnity association with which the Ship is entered, all
certificates issued by the United States Coast Guard, all
confirmations by such association of cover for oil pollution
risks and such other information and documents relating to oil
pollution risks or insurance as the Owner may from time to time
request;
(p) Encumbrances
not create or permit to exist any Encumbrance over the Insurances
or any Requisition Compensation, or its interest therein save as
contemplated by this Agreement; and
(q) Information concerning Insurances
supply to the Owner all necessary information, documentation and
assistance which may be required by the Owner in connection with
making any claim under the Insurances.
18.2 Further Requirements
<PAGE> 50
Notwithstanding the other provisions of this clause 18, the Hirer shall
comply with such further requirements relative to insurance as the
Owner may from time to time stipulate and which are consistent with
normal market practice for a vessel and equipment of the type of the
Ship and in the area in which the Ship is operating.
18.3 Wreck Removal
In the event of the Ship becoming a wreck or obstruction to navigation
the Hirer shall (in addition to any other obligation it may have under
clause 10) indemnify and hold harmless the Owner against all costs,
expenses, payments, charges, losses, demands, any liabilities, claims,
actions, proceedings (whether civil or criminal) penalties, fines,
damages, judgments, orders or other sanctions which may be incurred,
by, or made or asserted against the Owner by reason that the Ship shall
have become a wreck or obstruction to navigation (including, without
limitation) in respect of the removal or destruction of the wreck or
obstruction under statutory powers but only to the extent that such has
not been recovered from the Ship's insurers.
19 POWERS OF OWNER TO REMEDY DEFAULTS
19.1 Failure to Perform Insurance Undertakings
If the Hirer fails to comply with any of the provisions of clause 18.1,
the Owner may, without being in any way obliged so to do, or
responsible for so doing, and without prejudice to the ability of the
Owner to treat that non-compliance as a Termination Event, effect and
thereafter maintain all such insurances upon the Ship as in its
discretion it may think fit in order to procure the compliance with
such provisions or alternatively, require the Ship (at the Hirer's
risk) to remain in, or to proceed to and remain in a port designated by
the Owner until such provisions are fully complied with.
19.2 Failure to Perform Maintenance Undertakings
If the Hirer fails to comply with any of the provisions of clauses
17.2(a), (c), (d) or (e), the Owner may, without being in any way
obliged so to do, or responsible for so doing, and without prejudice to
the ability of the Owner to treat that non-compliance as a Termination
Event, arrange for the carrying out of such repairs, changes or surveys
as it may deem expedient or necessary in order to procure the
compliance with such provisions and the Owner agrees that prior to the
exercise of any of its powers contained in this clause 19.2 it shall
give notice to the Hirer of the intended exercise of its powers
provided that the failure by the Owner to give such notice shall not
affect the validity of the Owner's actions under this clause 19.2 and
for the purpose of the other provisions of this Agreement it shall be
as if there was no such requirement to give notice.
19.3 Failure to Prevent or Release from Arrest
<PAGE> 51
If the Hirer fails to comply with any of the provisions of clause
13.3(d) the Owner may, without being in any way obliged so to do, or
responsible for so doing, and without prejudice to the ability of the
Owner to treat that non-compliance as a Termination Event, pay and
discharge all such debts, damages, liabilities and outgoings as are
therein mentioned and/or take any such measures as it may deem
expedient or necessary for the purpose of securing the release of the
Ships in order to procure the compliance with such provisions.
19.4 Failure to comply with other Obligations
If the Hirer fails to comply with any of its other obligations under
this Agreement or any of the other Hirer's Documents, the Owner may,
without being in any way obliged to do so or responsible for so doing,
and without prejudice to the ability of the Owner to treat that
non-compliance as a Termination Event, take such action as it may deem
expedient or necessary in order to procure the compliance with such
provisions.
19.5 Costs of Remedying Defaults
Without prejudice to clause 27.1, all losses, liabilities, costs,
charges, expenses, damages and outgoings of whatsoever nature
(including without limitation, Taxes, repair costs, registration fees
and insurance premiums) suffered, incurred or paid by the Owner in
connection with the exercise by the Owner of any of its powers under
clauses 19.1, 19.2, 19.3 and 19.4 and interest on all such losses,
liabilities, costs, charges, expenses, damages and outgoings from the
date on which the same were suffered, incurred or paid by the Owner
until the date of receipt or recovery thereof (both before and after
any relevant judgement) at the Relevant Rate of Interest shall be
repayable by the Hirer to the Owner on demand.
19.6 Rental Amounts Still Payable
Notwithstanding any exercise by the Owner of any of the powers
contained in this clause 19, Rental Amounts shall continue to be
payable during such time.
20 CONSUMABLE STORES
20.1 Upon Delivery
All consumable stores, unused diesel and lubricating oils and bunkers
on board the Ship at Delivery shall be taken over by the Hirer at no
extra cost.
21 USE OF EQUIPMENT AND REPLACEMENT
21.1 Use of Equipment and Manuals and Technical Records
The Hirer shall have the use of all outfit, equipment (including cabin,
crew and galley equipment), furnishings, furniture and fittings, spare
and replacement parts which are the property of the Owner on board the
Ship at the time of Delivery and the Manuals and Technical Records.
<PAGE> 52
21.2 Renewal of Equipment
The Hirer shall at its own expense from time to time during the Hire
Period replace, renew or obtain substitutions for such items of
Equipment and other equipment as shall be so damaged or worn as to be
unfit for use including any items of equipment added to the Ship and
acquired under the Upgrade Contract and the Supply Contracts, provided
always that in any such case title to any part replaced, renewed or
substituted shall remain with the Owner until the part which replaced
it or the new or substituted part becomes the property of the Owner or
is replaced, renewed or substituted by a part which thereupon becomes
the property of the Owner and the Hirer agrees that if any replaced,
renewed or substituted part is not the property of the Owner it will as
soon as practicable replace the same with a part which thereupon
becomes the property of the Owner.
21.3 Alteration of Equipment; Additional Equipment
The Hirer may at any time alter or remove all or any items of Equipment
or other equipment or may fit any additional equipment required to
render the Ship available for any purpose for which the Hirer may
require to use her in accordance with the provisions of clause 15
provided that the Hirer shall first have obtained the prior written
consent of the Owner thereto if and to the extent such consent may be
required pursuant to clause 17.2(i) and provided the Hirer has procured
adequate storage facilities in respect of such removed Equipment or
other equipment and has effected adequate insurances in respect thereof
as approved by the Owner. Any additional equipment so fitted by the
Hirer shall be considered the property of the Hirer who may remove such
additional equipment at any time before the expiration of the Hire
Period. The cost of fitting or removing any equipment together with the
cost of making good any damage caused by such fitting or removal shall
be payable in full by the Hirer.
22 MORTGAGES
22.1 Owner's Undertakings
The Owner warrants that the Ship and the Owner's interest in the
Insurances or any Requisition Compensation will at the Delivery Date be
free of any Encumbrances created by it and undertakes that it will not
during the Hire Period, without the prior written consent of the Hirer,
create any Encumbrance over the Ship, or any share or interest therein
or the Owner's interest in the Insurances or any Requisition
Compensation.
23 LOSS AND DAMAGE
23.1 Risk
Except as specified in clause 7.1, the Ship shall throughout the Hire
Period be in every respect at the risk of the Hirer who shall bear all
risks howsoever arising whether of navigation, operation and
maintenance of the Ship or otherwise and
<PAGE> 53
of any other occurrence of whatever kind which shall deprive the Hirer
of the use, possession or enjoyment thereof.
23.2 Total Loss
(a) If the Vessel shall become a Total Loss during the Hire Period,
the Hirer shall pay, or procure that the insurers pay, to the
Owner within 30 days (or such longer period as may be agreed by
the Owner in writing) of the date on which the Total Loss
occurred, the Termination Sum as at the date of payment thereof
together with all amounts then due and payable under this
Agreement in respect of the Ship including, without prejudice to
the generality of the foregoing, all amounts which the Hirer is
required to pay to the Owner under clause 31.3.
(b) For the purposes of this Agreement, a Total Loss of the Vessel
shall be deemed to have occurred:
(i) in the case of an actual total loss of the Vessel, at noon
(London time) on the actual date and at the time the Vessel
was lost or, if such date is not known, on the day on which
the Vessel was last reported;
(ii) in the case of a constructive total loss of the Vessel,
upon the date and at the time notice of abandonment of the
Vessel is given to the insurers of the Vessel for the time
being (provided a claim for such constructive total loss is
admitted by the insurers) or, if the insurers do not admit
such a claim, at the date and at the time at which a
constructive total loss is subsequently adjudged by a
competent court of law to have occurred;
(iii) in the case of a compromised or arranged total loss, on the
date upon which a binding agreement as to such compromised
or arranged total loss has been entered into by the
insurers of the Vessel;
(iv) in the case of Compulsory Acquisition, on the date upon
which the relevant requisition of title or other compulsory
acquisition occurs;
(v) in the case of hijacking, theft, condemnation,
confiscation, capture, arrest, detention, seizure of the
Vessel (other than where the same amounts to Compulsory
Acquisition of the Vessel) by any Government Entity, or by
persons purporting to act on behalf of any Government
Entity, which deprives the Hirer of the use of the Vessel
upon the expiry of the period of 180 days after the date
upon which the relevant hijacking, theft, condemnation,
confiscation, capture, arrest, detention or seizure
occurred.
<PAGE> 54
23.3 Continuation of Hire Period
The Hirer shall continue to pay Rental Amounts on the days and in the
amounts required under this Agreement notwithstanding that the Vessel
shall become a Total Loss, or if for any reason the Hirer shall be
permanently deprived of her use prior to the end of the Hire Period,
provided always that no further Rental Amounts shall become due and
payable after the date on which all sums due under clause 23.2(a) in
respect of the Ship shall have been paid in full.
23.4 Application of Requisition Compensation
In the event of the Compulsory Acquisition of the Ship after Delivery,
all Requisition Compensation received by the Owner shall be applied by
the Owner (or, if received by the Hirer, shall be held in trust by the
Hirer for application) in accordance with clause 23.5.
23.5 Application of Total Loss Insurance Recoveries
All moneys received by the Owner from insurers in respect of a Total
Loss shall be applied by the Owner, subject to clause 12.4, as follows:
(a) firstly, in or towards settlement of any amounts due and owing by
the Hirer to the Owner under this Agreement or any of the other
Hirer's Documents including, without prejudice to the generality
of the foregoing, amounts owing by the Hirer to the Owner under
clause 32.3 of this Agreement (including any interest due in
respect thereof);
(b) secondly,if the Hirer shall on or before the date of application
of such moneys have paid the Termination Sum in accordance with
clause 23.2(a) or a part thereof, in or towards refunding by way
of rebate of charterhire to the Hirer an amount equal to the
Termination Sum or part thereof so paid by the Hirer; and
(c) thirdly, to the Hirer.
23.6 Damage Claims
In the event of repairable damage to the Ship, the Owner shall pay any
insurance moneys received by it to the Hirer upon the Hirer furnishing
evidence to the Owner that such damage has been made good or repaired
or shall effect payment of stage payments with regard thereto provided
always that if a Relevant Event has occurred and is continuing, the
Owner shall be entitled to apply such insurance moneys in or towards
settlement of any amounts due and owing by the Hirer to the Owner under
this Agreement or any of the other Hirer's Documents.
23.7 Third Party Claims
Any insurance moneys paid under the insurances taken out or entries
made referred to in clause 18.1(a)(ii) shall be paid to the person to
whom the liability (or alleged liability) covered by such insurances or
entry was incurred or, if the
<PAGE> 55
liability (or alleged liability) to such person has previously been
discharged by the Hirer, such moneys shall be paid to the Hirer in
reimbursement of the moneys so expended by it in satisfaction of such
liability or alleged liability and, in such case, the Owner shall pay
any insurance moneys received by it in respect of such liability or
alleged liability to the Hirer upon the Hirer furnishing evidence to
the Owner that such liability or alleged liability has previously been
discharged provided always that if a Relevant Event has occurred and is
continuing, the Owner shall be entitled to apply such insurance moneys
in or towards settlement of any amounts due and owing by the Hirer to
the Owner under this Agreement or any of the other Hirer's Documents.
23.8 Insufficient Insurance Recovery
In the event of repairable damage to the Ship or a liability or alleged
liability covered by the insurances taken out or entries made referred
to in clause 18.1(a) being incurred or alleged, and if the insurance
moneys paid in respect thereof are insufficient to pay the cost or
estimated cost of making good or repairing such damage or discharging
the liability or alleged liability, the Hirer will pay the deficiency.
23.9 Notice of Abandonment
Either the Owner or the Hirer shall have the right to determine whether
or not a case has arisen for the giving of notice of abandonment to
abandon the Ship to the insurers and/or claim a constructive total loss
and the Hirer is hereby irrevocably authorised by the Owner to give the
same if it so determines.
The Owner shall upon the request of the Hirer promptly execute such
documents as may be required to enable the Hirer to abandon the Ship to
the insurers and/or claim a constructive total loss and the Owner shall
give the Hirer all possible assistance in pursuing the said claim.
23.10 Payment of Claims
Any moneys payable under the Insurances shall be payable in accordance
with the terms of the relevant Loss Payable clause and, unless and
until a Relevant Event shall occur (whereupon all insurance recoveries
shall be receivable by the Owners and applied in accordance with the
foregoing provisions of this clause 23), the Owner shall not give any
notice or direction to the contrary to the insurers as contemplated by
the Loss Payable Clauses.
24 SALVAGE
All salvage and towage and all proceeds from derelicts shall, subject
to the Owner's prior right to retain thereout any sums which may be due
from the Hirer to the Owner under this Agreement or any of the other
Hirer's Documents, be for the Hirer's benefit and the cost of repairing
damage occasioned thereby shall be borne by the Hirer.
<PAGE> 56
25 REQUISITION FOR HIRE
25.1 Effect of Requisition for Hire
If the Ship is requisitioned for hire by any Government Entity or other
competent authority during the Hire Period then, unless and until the
Vessel becomes a Total Loss following such requisition and the Hirer
shall have made payment of all sums due pursuant to clause 23.2(a),
this Agreement shall continue in full force and effect in respect of
the Ship (subject always to the provisions of clauses 27 and 31.2) for
the remainder of the Hire Period and the Hirer shall remain fully
responsible for the due compliance with all its obligations under this
Agreement and the other Hirer's Documents in respect of the Ship other
than such obligations which the Hirer is unable to comply with solely
by virtue of such requisition.
25.2 Payment of Requisition Hire
If the Hirer shall duly comply with its obligations under this
Agreement and the other Hirer's Documents, save as mentioned in clause
25.3, the Hirer shall during the Hire Period be entitled to all
requisition hire paid to the Owner or to the Hirer by such Government
Entity or other competent authority on account of such requisition.
25.3 Owner to account for Requisition Hire
The Owner shall (subject to any right of set-off which the Owner may
have in respect of any amounts due and unpaid under the terms hereof)
pay any requisition hire to the Hirer immediately upon receipt.
25.4 Reinstatement of Ship
The Hirer shall as soon as practicable after the end of any requisition
for hire, cause the Ship to be put into the condition required by this
Agreement.
25.5 Compensation for Reinstatement
The Owner shall be entitled to all compensation payable in respect of
any change in the structure, state or condition of the Ship arising
during the period of requisition for hire. The Owner shall apply all
such compensation in reimbursing the Hirer for the cost of complying
with its obligations under clause 25.4 and any surplus shall be paid by
the Owner to the Hirer by way of rebate of hire, provided always that
if a Relevant Event has occurred and is continuing, the Owner shall be
entitled to apply such compensation in or towards settlement of any
amounts owing by the Hirer under this Agreement or any of the other
Hirer's Documents.
25.6 Continuing Requisition for Hire
Should the Vessel be under requisition for hire at the end of the Hire
Period:
<PAGE> 57
(a) the charter of the Ship under this Agreement shall (unless
otherwise agreed between the parties hereto) nevertheless be
terminated at such end but without prejudice to the accrued
rights of the parties including, without prejudice to the
generality of the foregoing, the obligation of the Hirer
contained in clause 25.4, and the Owner shall be entitled to
receive and retain any requisition hire payable in respect of the
period from the expiry or termination of the Hire Period;
(b) after such release the Hirer shall be given a reasonable
opportunity of removing any such additional equipment as is
referred to in clause 21.3 on the terms therein referred to.
26 TERMINATION EVENTS
26.1 The Owner and the Hirer agree that it is a fundamental term and
condition of this Agreement that none of the following events shall
occur during the Hire Period and that the occurrence of any of the
following events shall constitute a repudiatory breach of this
Agreement by the Hirer:
(a) if any Relevant Party fails to pay any Rental or other sum
payable under the Relevant Documents on its due date or in
respect of sums payable on demand, fails to pay any other sum
payable on demand under the Relevant Documents within five (5)
Business Days after demand; or
(b) if any Relevant Party fails or neglects to observe or perform any
of the terms and conditions of the Relevant Documents in a way
which the Owner regards as material (otherwise than as mentioned
in Clause 26.1(a)) and in the case of a failure or non-observance
which is capable of remedy such failure or non-observance shall
continue unremedied for fourteen days after the Owner becomes
aware of it; or
(c) if any Relevant Party shall do or allow to be done or omit to do
any act or thing which act or omission in the opinion of the
Owner may materially jeopardise any of its rights in relation to
the Ship; or
(d) if any statement, representation or warranty made by any Relevant
Party inducing the Owner to enter into the Relevant Documents or
made on the part of any Relevant Party in the Relevant Documents
or in any certificate, statement or notice delivered or made
pursuant to the Relevant Documents shall be or become incorrect
in any respect; or
(e) if any process of execution, diligence or distress shall be
levied on executed against or sued out against the Ship or any
goods or other property belonging to any Group Company and shall
not be discharged within seven days; or
(f) if an order shall be made or a resolution passed for the winding
up (other than by way of a members' voluntary winding up for the
purpose of a
<PAGE> 58
scheme of amalgamation or reconstruction or for any other
purpose in any case previously approved by the Owner) of any
Group Company; or
(g) if any Group Company shall convene a meeting for the purpose of
making or shall make a composition or arrangement with or any
assignment or assignation for the benefit of its creditors; or
(h) if an encumbrancer shall take possession or a receiver or
liquidator shall be appointed in respect of whole or any part of
the assets or undertaking of any Group Company; or
(i) if any Group Company shall be unable to pay its debts as such
expression is defined in Section 123 of the Insolvency Act 1986;
or
(j) if any indebtedness or obligation of any Group Company (other
than an indebtedness or obligation of less than US$500,000) shall
become due and payable prior to the specified maturity date
thereof or any agreement for the hiring of machinery or plant to
a Group Company or any material hire purchase or conditional sale
agreement to a Group Company shall be terminated by reason of an
event of default thereunder or any indebtedness of a Group
Company in connection with any such agreement shall not be paid
when due or any Group Company shall not meet its obligations
under any guarantee or indemnity when properly called upon to do
so; or
(k) if the Hirer shall cease to be a Subsidiary (directly or
indirectly) of Eagle Geophysical Inc. without the Owner's prior
written approval; or
(l) if any security constituted by any mortgage or charge created by
any Group Company including the security constituted by the
Account Assignment shall become enforceable and the mortgagee or
the chargee shall take steps to enforce the same unless any such
security has become illegal or unenforceable in accordance with
clause 32; or
(m) if any event or proceedings in any jurisdiction which is or are
analogous to any of the events or proceedings referred to in
sub-clauses (e), (f), (g), (h), (i) or (l) of this Clause 26.1
shall occur or be commenced in relation to any Group Company; or
(n) if the Hirer, the Surety or either of the Corporate Guarantors
are in breach of any other agreement with or obligation in favour
of the group of companies of which the Owner forms part ("OWNER
GROUP") for a period in excess of any applicable grace period
under the terms of such agreement or obligation or (if none) for
14 days; or
(o) if the Hirer, the Surety or either of the Corporate Guarantors
dispose of all or a substantial part of their assets otherwise
than for full consideration in money or money's worth payable at
the time of such disposal and otherwise than to another Group
Company, without the
<PAGE> 59
prior written consent of the Owner, whether such disposal is
effected in one transaction or a series of transactions whether
or not related; or
(p) If:
(i) the Hirer, the Surety or either of the Corporate Guarantors
or any other Group Company shall at any time reduce to a
substantial extent the scale of its business now carried on
by such companies respectively or if there shall be a
substantial reduction in the scale on which the businesses
now carried on by Group Companies (taken as a whole) are
carried on in each case as compared with the scale on which
the same is or are carried on at the date hereof; and
(ii) the Owner acting reasonably shall certify that in its
opinion in all the circumstances the risk to the Owner in
connection with the Relevant Documents has materially
increased; or
(q) if after the date hereof and without the prior written consent of
the Owner (such consent not to be unreasonably withheld or
delayed) any of either of the Corporate Guarantors, the Surety or
the Hirer or of any Subsidiary (directly or indirectly) of the
Hirer ceases to be a wholly owned subsidiary of Eagle Geophysical
Inc; or
(r) if any judgment or order is made against any Group Company and is
not stayed or complied with within seven days.
26.2 Hirer Administration Order
If at any time an application by petition is presented to any Court
under section 9 of the Insolvency Act 1986 for an administration order
(or under any other law in any other jurisdiction for an order
analogous to such an administration order) to be made against the
Hirer, the Surety or either of the Corporate Guarantors:
(a) the existence of circumstances giving rise to such application
shall constitute the repudiation by the Hirer of this Agreement,
which repudiation shall be deemed to have been immediately
accepted by the Owner;
(b) this Agreement shall forthwith terminate immediately without
notice;
(c) the Hirer shall no longer be entitled to possession of the Ship;
provided always that such termination shall not affect any rights the
Owner may have against the Hirer arising hereunder on or before such
termination or at common law.
27 OWNER'S RIGHTS FOLLOWING A TERMINATION EVENT
27.1 Termination Rights and Payments
<PAGE> 60
At any time after the repudiation of this Agreement by the Hirer,
including the occurrence of any Termination Event (and provided that
the same is continuing) the Owner may, by notice to the Hirer, accept
such repudiation and immediately terminate the Hire Period (whereupon,
the Hirer agrees and acknowledges, the Hirer's right, title and
interest in and to the Ship and to possess and operate the Ship, shall
terminate) and retake possession of the Ship, the Owner agreeing, in
such circumstances, that (provided that the seaworthiness of the Ship
is not thereby impaired nor the value of the Ship thereby materially
diminished nor the specification or structure of the Ship thereby
materially altered) the Hirer may first remove or that the Owner will
at the Hirer's cost and expense remove and deliver to the Hirer, or to
whomsoever else may be entitled thereto, any equipment belonging to the
Hirer installed in or on the Ship, and the Hirer agrees that the Owner
may for this purpose enter upon any premises belonging to or in the
occupation or under the control of the Hirer where the Ship or any part
thereof may be located and the Hirer shall pay to the Owner forthwith
upon such termination such sum as shall equal the aggregate of:
(a) all amounts due under this Agreement and any of the other Hirer's
Documents as shall be payable and remain outstanding including,
without prejudice to the generality of the foregoing, all amounts
due to the Owner under clause 32.2 and 32.3;
(b) all losses incurred by the Owner in connection with such
termination including, without prejudice to the generality of the
foregoing, all costs and expenses so incurred in recovering
possession of the Ship, and in carrying out any works or
modifications required;
and the Hirer shall also pay to the Owner forthwith upon such
termination by way of agreed compensation and not as a penalty the
amount of the Termination Sum as at the date of termination.
28 NOTICES
28.1 Every notice, request, demand or other communication under this
Agreement shall:
(a) be in writing delivered personally or by prepaid first class
letter or facsimile transmission (confirmed in the case of a
facsimile transmission by prepaid first class letter sent within
24 hours of despatch but so that the non-receipt of such
confirmation shall not affect in any way the validity of the
facsimile transmission in question);
(b) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a facsimile transmission, at the
time of despatch with confirmation that the communication was
well received (provided that, in the case of a facsimile
transmission, if the date of despatch is not a business day in
the country of the addressee it shall be deemed to have been
received at the opening of business on the next such
<PAGE> 61
business day) and in the case of a letter, when delivered
personally or three (3) days after being put in the post;
(c) be sent:
(1) to the Owner to: British Linen Shipping Limited
4, Melville Street
Edinburgh EH3 7NS
Scotland
Fax: 0131 243 8423
(Attention: Managing Director / The Company Secretary)
(2) to the Hirer to: Horizon Exploration Limited
Horizon House
1 Suffolk Way
Sevenoaks
Kent TN13 1YL
England
Fax: 01732 742977
(Attention: Neil Campbell)
(3) to the Surety to:Eagle Geophysical Offshore Inc
50 Briar Hollow West
6th Floor
Houston
Texas 77027
United States of America
Fax: 001 713 881 2853
(Attention: Chief Financial Officer)
or to such other address or facsimile number as is notified by
one party to the other under this Agreement .
29 LIENS AND INDEMNITIES
29.1 No Authority to impose Liens
Neither the Hirer nor the Master of the Ship shall have any right power
or authority to create incur or permit to be imposed upon the Ship any
liens whatsoever except for Permitted Liens. The Hirer agrees to carry
a properly certified copy of this Agreement with the Vessel's papers
and to exhibit the
<PAGE> 62
same to any person having business with the Vessel which might give
rise to any lien thereon other than Permitted Liens.
The Hirer further agrees to fasten to the Ship in a conspicuous place
and to keep so fastened during the Hire Period a notice reading as
follows:
"This Ship is the property of and is registered in the name of
British Linen Shipping Limited. It is under demise charter to
Horizon Exploration Limited and, by the terms of the charter,
neither the charterer nor the Master nor any servant or agent
thereof has any right, power or authority whatsoever to contract
on behalf of the Owner or to pledge the Owner's credit or to
involve the Owner in any liability whatsoever or to create,
incur, or permit to be imposed on the Ship any lien whatsoever
except for general average, crews' wages and salvage"
or in such other form as the Owner may require from time to time.
The Hirer shall not remove or, cover up such notice, and will not place
or permit to be placed any other notice (affecting the ownership of the
Ship or otherwise relating to the rights of the Owner and dealing with
the rights of any person other than the Owner in or on the Ship or any
part thereof) without prior written consent of the Owner such consent
not to be unreasonably withheld so long as the same is not inconsistent
with the rights of the Owner of the Ship.
The Hirer agrees to give written instructions with regard to the
foregoing matters to the Master of the Vessel, such instructions to be
in such terms as may from time to time be required by the Owner.
29.2 Release from Arrest: Owner's Vessels
If the Ship or any other vessel for the time being owned (in whole or
in part) by or chartered to the Owner shall at any time have a writ or
libel filed against it or be arrested, attached or levied upon pursuant
to any legal process or purported legal process or be detained in
exercise or purported exercise of any lien or claim of whatsoever
nature, whether arising out of the use or operation of the Ship or out
of the use or operation of any other vessel owned by or chartered to
the Hirer or any other company associated with, the Hirer or its
subsidiaries or associated companies or otherwise by reason of the act
or omission of any of the aforesaid persons, the Hirer shall forthwith
upon receiving notice thereof at its expense procure the release of the
Ship or such other vessel (as the case may require) from such arrest,
detention, attachment or levy or, as the case may be, the discharge of
the writ or libel by providing bail or procuring the provision of
security or otherwise as the circumstances may require and the Hirer
shall be responsible for discharging each and every liability in
connection with any such process, claim, lien or other action. Without
prejudice to the generality of the other indemnities contained in this
Agreement or any of the other Hirer's Documents, should any other
vessel owned by the Owner and chartered by it otherwise than to the
Hirer be arrested, detained, attached or levied upon or be the subject
of a writ or libel in such circumstances, the Hirer shall indemnify the
<PAGE> 63
Owner against all claims made on the Owner by the charterers of such
other vessel in connection with such arrest, detention, attachment,
levy, writ or libel.
30 ASSIGNMENT AND SALE OF SHIP
30.1 Assignment by Hirer
The Hirer may not assign or transfer any of its rights or obligations
under this Agreement or any of the other Hirer's Documents without the
prior written consent of the Owner.
30.2 Assignment by the Owner
The Owner may not, other than to a financial institution, assign or
transfer any of its rights or obligations under this Agreement or any
of the other Hirer's Documents without the prior written consent of the
Hirer, which consent shall not be unreasonably withheld.
30.3 Sale of Ship
During the Hire Period the Owner shall not sell, transfer, assign or
otherwise dispose of the legal title to, or beneficial interest in, the
Ship, or agree to do so, save as expressly contemplated by the
provisions of this Agreement.
31 TRANSFER OF OWNERSHIP
31.1 Purchase Agreement
The Hirer shall, subject to clauses 4.2, 23.2(a) and 27.1, have an
option to purchase the Ship or nominate a purchaser of the Ship upon
expiry of the Hire Period at the Purchase Price in accordance with the
terms of this Agreement (the "OPTION") and shall be entitled to
exercise the Option by giving not less than thirty (30) days notice in
writing to the Owner prior to the expiry of the Hire Period indicating
its intention to exercise the Option provided that in the event that
the Hirer shall nominate a purchaser of the Ship, the Hirer shall as
against the Owner continue to remain liable for the payment of the
Purchase Price. The right of the Hirer to exercise the Option shall
however be subject to payment by the Hirer of all other amounts owing
by or accrued due from the Hirer under this Agreement and the other
Hirer's Documents.
31.2 As is where is
In the event that the Hirer or nominated purchaser of the Ship elects
to purchase the Ship in accordance with clause 31.1 the Ship will be
transferred to the Hirer or its nominee in the condition and at the
place or places in which it and the items comprising the same are on
the date of transfer, subject to any sub-charter or other agreement
relating thereto which may be in force on the date of transfer and
subject to any Encumbrances on the Ship other than any Encumbrances
created by the Owner.
<PAGE> 64
31.3 Exclusion Clause
Other than as referred to in this clause 31.3, the Owner makes and will
make no warranties, guarantees or representations of any kind, express
or implied, statutory or otherwise, with regard to the Ship including,
but not limited to the seaworthiness and condition of the Ship, and the
Hirer or its nominee in the event of its purchase of the Ship agrees to
waive all remedies, warranties, representations, guarantees, express or
implied arising by law or otherwise, including without limitation any
obligation of the Owner with respect to fitness for any purpose
merchantability or consequential damages. The Owner warrants that,
subject to any provisions of any sub-charter on the date of transfer of
the Ship to the Hirer or its nominee pursuant to clause 31.1 (the
"TRANSFER DATE"), there shall be vested in the Owner such title to the
Ship as was acquired by the Owner on the Delivery Date and that the
Ship will (provided that the amounts referred to in clause 31.1 have
been paid in full) be free and clear of all Encumbrances created by the
Owner.
31.4 Transfer of Title
Concurrently with the payment by the Hirer to the Owner of (i) the sum
referred to in clause 31.1 and (ii) all other amounts owing by or
accrued due from the Hirer under this Agreement and/or any of the other
Hirer's Documents and provided the Hirer has fully indemnified the
Owner against all and any liabilities or Taxes related to the sale of
the Ship, the Owner shall (subject as hereinafter provided) pass to the
Hirer all of the Owner's rights, title and interest in and to the Ship
(subject to any sub-charter or other agreement relating to the Ship
which may be in force on the Transfer Date and subject to any
Encumbrances on the Ship other than any Encumbrances created by the
Owner) by executing a bill of sale in respect of the Ship in favour of
the Hirer or its nominee and shall, at the Hirer's request and the
Hirer's cost, render to the Hirer all such assistance as the Hirer may
reasonably request in connection with the transfer of title to the
Hirer or its nominee of the Ship, free from any Encumbrance created by
the Owner. Provided however that the Owner's obligation to pass such
title to the Hirer or its nominee shall not be deemed to include an
obligation on the Owner to deliver to the Hirer on the Transfer Date or
at all, possession of the Ship and/or any items comprising the same if
the Ship and/or any such items shall not be in the possession of the
Owner on the Transfer Date.
31.5 Redelivery Procedure and Condition
In the event that the Hirer does not purchase the Ship pursuant to the
provisions of clause 31.1 the Hirer shall at the end of the Hire Period
re-deliver the Ship to the Owner charter free and free of all
Encumbrances, and the Owner shall accept such re-delivery, at a safe
port to be mutually agreed between the parties or, in the absence of
such agreement, at such nearby safe port in the United Kingdom as the
Owner may require. Subject to any agreement of the Owner and the Hirer
to the contrary, the Hirer shall at its expense before such re-delivery
make all such repairs and do all such work as may be necessary so that
the Ship at the date of re-delivery shall have installed the Equipment
and other machinery
<PAGE> 65
installed on the Ship at Delivery or replacements for the same made in
accordance with the provisions of this Agreement, shall maintain the
Classification unexpired and shall be in as good structural, state and
condition as at Delivery, fair wear and tear and changes and
alterations properly made by the Hirer as permitted under this
Agreement excepted.
32 INCREASED COSTS, FUNDING PROBLEMS AND ILLEGALITY
32.1 If any law, regulation or regulatory requirement or any judgment, order
or direction of any court, tribunal or authority taking effect after
the date of this Agreement which is binding upon the Owner or as the
case may be its holding company in the jurisdiction in which it is
formed or in which any action is required to be performed by it for the
purposes of this Agreement or if compliance by the Owner or as the case
may be its holding company with any direction, request or requirement
(whether or not having the force of law) of any monetary agency,
central bank or competent governmental or other authority shall:
(a) subject the Owner or as the case may be its holding company to
Taxes or change the basis of Taxation of the Owner with respect
to any payment under any of the Relevant Documents (other than in
the case of Taxes or Taxation which are the subject of an
indemnity from the Hirer to the Owner under clause 10 and other
than Taxes relating to the income and capital gains of the
Owner); or
(b) impose, modify or deem applicable any reserve requirements or
require the making of any special deposits against or in respect
of any assets or liabilities of, deposits with or for the account
of, or loans by, the Owner or its holding company as the case may
be; or
(c) impose on the Owner any other condition with respect to any of
the Relevant Documents or its obligations under any of the
Relevant Documents
and, as a result of any of the foregoing, the cost to the Owner of
funding, financing or re-financing its purchase of the Ship or of
owning the Ship or chartering the Ship to the Hirer under this
Agreement is increased or the amount payable or the effective return to
the Owner under this Agreement is reduced or the Owner makes a payment
or foregoes a return on or calculated by reference to any amount
payable to it under this Agreement (other than as provided in (a)
above), then and in each such case the Owner shall as soon as
practicable after becoming aware of the same notify the Hirer of the
circumstances thereof and the Hirer shall pay to the Owner on demand
the amount which the Owner specifies (in a certificate setting forth
the basis of the computation of such amount) is required to compensate
the Owner for such increased cost, reduced return, payment or foregone
return.
Any demand under clause 32.1 may be made at any time whether or not the
Hire Period shall have terminated or expired. For the purposes of this
clause 32.1
<PAGE> 66
"holding company" has the meaning ascribed to it in section 736 of the
Companies Act, 1985.
32.2 If any law, regulation or regulatory requirement or any judgment, order
or direction of any court, tribunal or authority binding upon the Owner
in the jurisdiction in which it is formed or in which any action is
required to be performed by it for the purposes of any of the Hirer's
Documents (whether or not in force before the date of this Agreement)
renders it unlawful for the Owner to continue to charter the Ship to
the Hirer under this Agreement then the Owner shall promptly inform the
Hirer and the Owner shall be entitled by written notice to the Hirer to
terminate the Hire Period. Upon such termination the Hirer shall
complete the purchase of the Ship on the terms set out in clause 31.1
save that the price shall equal the aggregate of the Termination Sum
and all other amounts then due and owing to the Owner under this
Agreement.
32.3 If any payment becomes due to the Owner under clause 4.2, 23.2(a) or
27.1, the Hirer shall promptly pay to the Owner the amount which the
Owner specifies is required to compensate the Owner for any loss
(including loss of profit) or expense which the Owner shall certify as
sustained or incurred by it as a consequence of the operation of clause
4.2, 23.2(a) or 27.1 (as the case may be) including (but not limited
to) any loss or expense sustained or incurred in terminating any
arrangements for the provision of fixed rate funding to the Owner for
the purposes of making the Ship available to the Hirer for the whole or
part of the Hire Term.
33 MISCELLANEOUS
33.1 Variations
The terms and conditions of this Agreement and the other Hirer's
Documents shall not be varied otherwise than by an instrument in
writing of even date herewith or subsequent hereto executed by or on
behalf of the Owner and the Hirer and the Surety.
33.2 Waivers
No failure or delay on the part of the Owner in exercising any right,
power or remedy under this Agreement or any of the other Hirer's
Documents shall operate as a waiver thereof nor shall any single or
partial exercise by the Owner of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
33.3 Remedies Cumulative
The remedies provided in this Agreement or any of the other Hirer's
Documents are cumulative and are not exclusive of any remedies provided
by law.
33.4 Time of the Essence
<PAGE> 67
Subject to the periods of grace referred to in clause 26, time shall be
of the essence as regards the performance by the Hirer and the Surety
of its obligations under this Agreement and the other Hirer's
Documents.
33.5 General Average
All rights and liabilities in respect of the Ship by way of general
average shall be for the account of the Hirer.
33.6 Partial Illegality
If any term or provision of this Agreement or any of the other Hirer's
Documents or the application thereof to any person or circumstances
shall to any extent be invalid or unenforceable, the remainder of this
Agreement and the other Hirer's Documents and application of such term
or provision to persons or circumstances (other than those as to which
it is already invalid or unenforceable) shall not be affected thereby
and each term and provision of this Agreement and the other Hirer's
Documents shall be valid and be enforceable to the fullest extent
permitted by law.
33.7 Set-off
The Hirer authorises the Owner without prejudice to any of the Owner's
rights of set-off at law, in equity or otherwise, at any time and
without notice to the Hirer to set off or withhold from any sum or sums
expressed in this Agreement or one of the other Hirer's Documents to be
payable to the Hirer by the Owner any amount due and payable to the
Owner from the Hirer under this Agreement or any of the other Hirer's
Documents. For any such purpose the Owner is authorised to purchase
with the sums which would but for this clause 33.7 be so payable to the
Hirer, such other currencies as may be necessary to effect such set off
or withholding. The Owner shall not be obliged to exercise any right
given to it by this clause 33.7. The Owner shall notify the Hirer
forthwith upon the exercise or purported exercise of any right of
set-off or withholding full details in relation thereto.
33.8 Further Assurance
The Hirer and the Surety undertakes that it will at its expense
execute, sign, perfect and do any and every such further assurance,
document, act or thing as in the reasonable opinion of the Owner may be
necessary or desirable to carry out the purpose of this Agreement or
any of the other Hirer's Documents or protect or enforce any right of
the Owner hereunder or thereunder or the title of the Owner in the
Ship.
33.9 Counterparts
This Agreement may be entered into in the form of three counterparts,
each executed by one of the parties, and, provided both the parties
shall so enter into this Agreement, each of the executed counterparts,
when duly exchanged or
<PAGE> 68
delivered, shall be deemed to be an original but, taken together, they
shall constitute one instrument.
33.10 Conflicts
In the event of any conflict between this Agreement and any of the
other Hirer's Documents the provisions of this Agreement shall prevail.
34 LAW AND JURISDICTION
34.1 Law
This Agreement is governed by and shall be construed in accordance with
English law.
34.2 Jurisdiction
For the benefit of the Owner each of the Hirer and the Surety
irrevocably agrees that any legal action or proceedings in connection
with this Agreement may be brought in the English courts or in the
courts of any other country chosen by the Owner each of which shall
have the jurisdiction to settle any dispute arising out of or in
connection with this Agreement. The Surety hereby irrevocably and
unconditionally submits to the jurisdiction of the English courts and
the courts of any country chosen by the Owner and irrevocably
designates, appoints and empowers the Hirer to receive for it and on
its behalf service of process issued out of the English courts in any
legal action or proceedings arising out of or in connection with this
Agreement. The submission to such jurisdiction shall not (and shall not
be construed so as to) limit the Owner's right to take proceedings
against the Hirer or the Surety in any other court of competent
jurisdiction nor shall the taking of proceedings in any one
jurisdiction or more preclude the taking of proceedings in any other
jurisdiction whether concurrently or not.
IN WITNESS whereof the parties hereto have entered into this Agreement
the day and year first above mentioned.
<PAGE> 69
SIGNED by John N. Coppard )
the duly authorised Attorney of BRITISH )
LINEN SHIPPING LIMITED pursuant to a )
power of attorney dated 30 March 1998 ) /s/ JOHN COPPARD
in the presence of: )
/s/ HUGO COETZEE ) Attorney-in-Fact
- -----------------------------------------------
Witness
Name: Hugo Coetzee
Address: Camomille Street London EC3A
Occupation: Solicitor
SIGNED by )
on behalf of ) /s/ G. M. HARRISON
HORIZON EXPLORATION )
LIMITED )
SIGNED by )
on behalf of ) /s/ G. M. HARRISON
EAGLE GEOPHYSICAL )
OFFSHORE INC. )
<PAGE> 1
EXHIBIT 10.3
Private and Confidential
DATED 30 MARCH 1998
----------------------------------------
EAGLE GEOPHYSICAL INC (1)
AND
ENERGY RESEARCH INTERNATIONAL (2)
AND
BRITISH LINEN SHIPPING LIMITED (3)
----------------------------------------
CORPORATE GUARANTEE
----------------------------------------
NORTON ROSE
London
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C> <C>
1 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined expressions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Constructions of certain terms . . . . . . . . . . . . . . . . . . . . . . . . 2
2 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Covenant to pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Guarantor as principal debtor; indemnity . . . . . . . . . . . . . . . . . . . 3
2.3 Certificates conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 No security taken by Guarantors . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Continuing security and other matters . . . . . . . . . . . . . . . . . . . . . 4
2.7 New accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Liability unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Collateral Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Waiver of Guarantors' rights . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Suspense accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Settlements conditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Guarantor to deliver up certain property . . . . . . . . . . . . . . . . . . . 7
3 Payments and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 No set-off or counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Grossing up for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Currency indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 Representations and warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Continuing representations and warranties . . . . . . . . . . . . . . . . . . . 8
4.2 Initial representations and warranties . . . . . . . . . . . . . . . . . . . . 10
4.3 Repetition of representations and warranties . . . . . . . . . . . . . . . . . 11
5 Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Negative undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6 Benefit of this Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Benefit and burden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Changes in constitution or reorganisation . . . . . . . . . . . . . . . . . . 14
6.3 No assignment by Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Disclosure of information . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7 Notices and other matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 No implied waivers, remedies cumulative . . . . . . . . . . . . . . . . . . . . 16
7.3 English translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Other guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8 Guarantors' obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Guarantor's obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9 Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.1 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.2 Submission to jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 3
THIS GUARANTEE is dated 30 March,1998 and made BETWEEN:
(1) EAGLE GEOPHYSICAL INC a company incorporated in the state of Delaware,
United States of America whose principal place of business is situate
at 50 Briar Hollow West, 6th Floor, Houston, Texas 77027;
(2) ENERGY RESEARCH INTERNATIONAL a company incorporated in the Cayman
Islands whose registered office is situate at PO Box 1043, George
Town, Grand Cayman, Cayman Islands (as "GUARANTORS"); and
(3) BRITISH LINEN SHIPPING LIMITED a company incorporated in Scotland
whose registered office is situate at 4 Melville Street, Edinburgh EH3
7NS (the "OWNER").
WHEREAS:
(A) by a Hire Purchase Agreement dated 1998
(the "HIRE PURCHASE AGREEMENT") and made between Eagle Geophysical
Offshore Inc., (the "SURETY"), Horizon Exploration Limited (the
"HIRER") and the Owner, the Owner has agreed to let and the Hirer has
agreed to hire m.v. "LABRADOR HORIZON" (the "SHIP") registered under
Bahamian flag under Official Number 715224;
(B) the Surety has agreed to guarantee the obligations of the Hirer to the
Owner under the Hire Purchase Agreement; and
(B) the execution and delivery of this Guarantee is one of the conditions
precedent to the Owner letting the Ship to the Hirer pursuant to the
Hire Purchase Agreement.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 Defined expressions
In this Guarantee, unless the context otherwise requires or unless
otherwise defined in this Guarantee, words and expressions defined in
the Hire Purchase Agreement and used in this Guarantee shall have the
same meaning where used in this Guarantee.
1.2 Definitions
In this Guarantee, unless the context otherwise requires:
"COLLATERAL INSTRUMENTS" means notes, bills of exchange, certificates
of deposit and other negotiable and non- negotiable instruments,
guarantees, indemnities and other assurances against financial loss
and any other documents or instruments which contain or evidence an
obligation (with or without security) to pay, discharge or be
responsible directly or indirectly for, any
1
<PAGE> 4
indebtedness or liabilities of the Hirer or any other person liable
and includes any documents or instruments creating or evidencing a
mortgage, charge (whether fixed or floating), pledge, lien,
hypothecation, assignment, trust arrangement or security interest
of any kind;
"GUARANTEE" includes each separate or independent stipulation or
agreement by the Guarantors or any of them contained in this
Guarantee;
"GUARANTEED LIABILITIES" means all moneys, obligations and liabilities
expressed to be guaranteed by the Guarantors in clause 2.1;
"INCAPACITY" means, in relation to a person, the death, bankruptcy,
unsoundness of mind, insolvency, liquidation, dissolution, winding-up,
administration, receivership, amalgamation, reconstruction or other
incapacity of that person whatsoever (and, in the case of a
partnership, includes the termination or change in the composition of
the partnership);
"RELEVANT JURISDICTION" means any jurisdiction in which or where the
Guarantors or any of them is incorporated, resident, domiciled, has a
permanent establishment, carries on, or has a place of business or is
otherwise effectively connected;
1.3 Headings
Clause headings and the table of contents are inserted for convenience
of reference only and shall be ignored in the interpretation of this
Guarantee.
1.4 Constructions of certain terms
In this Guarantee, unless the context otherwise requires:
(a) references to clauses are to be construed as references to the
clauses of this Guarantee;
(b) references to (or to any specified provision of) this
Guarantee or any other document shall be construed as
references to this Guarantee, that provision or that document
as in force for the time being and as amended from time to time
in accordance with the terms thereof, or, as the case may be,
with the agreement of the relevant parties;
(c) words importing the plural shall include the singular and vice
versa;
(d) references to a time of day are to London time;
(e) references to a person shall be construed as including
references to an individual, firm, company, corporation,
unincorporated body of persons;
(f) references to a "guarantee" include references to an indemnity
or other assurance against financial loss including, without
limitation, an obligation to purchase assets or
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services as a consequence of a default by any other person to
pay any Indebtedness and "guaranteed" shall be construed
accordingly; and
(g) references to any enactment, amended or extended shall be
deemed to include reference to such enactment as re-enacted,
amended or extended.
2 GUARANTEE
2.1 Covenant to pay
In consideration of the Owner letting the Ship to the Hirer pursuant
to the Hire Purchase Agreement, the Guarantors hereby jointly and
severally guarantee to pay to the Owner, on demand by the Owner all
moneys and discharge all obligations and liabilities now or hereafter
due, owing or incurred by the Hirer and the Surety to the Owner under
or pursuant to the Hire Purchase Agreement and/or any of the other
Hirer's Documents when the same become due for payment or discharge
whether by acceleration or otherwise, and whether such
moneys, obligations or liabilities are express or implied, present,
future or contingent, joint or several, incurred as principal or
surety, originally owing to the Owner or purchased or
otherwise acquired by it, denominated in Dollars or in any other
currency, or incurred in any other manner whatsoever.
Such liabilities shall, without limitation, include interest (as well
after as before judgment) to date of payment at such rates and upon
such terms as may from time to time be agreed, commission, fees and
other charges and all legal and other costs, charges and expenses on a
full and unqualified indemnity basis which may be incurred by the Owner
in relation to any such moneys, obligations or liabilities or generally
in respect of the Hirer, the Surety, the Guarantors or any of them or
any Collateral Instrument.
2.2 Guarantor as principal debtor; indemnity
As a separate and independent stipulation, the Guarantors agree that if
any purported obligation or liability of the Hirer or of the Surety
which would have been the subject of this Guarantee had it been valid
and enforceable is not or ceases to be valid or enforceable against the
Hirer and/or the Surety on any ground whatsoever whether or not known
to the Owner (including, without limitation,, any irregular exercise or
absence of any corporate power or lack of authority of, or breach of
duty by, any person purporting to act on behalf of the Hirer or the
Surety or any legal or other limitation, whether under the Limitation
Acts or otherwise or any disability or Incapacity or any change in the
constitution of the Hirer or the Surety) the Guarantors shall
nevertheless be jointly and severally liable to the Owner in respect of
that purported obligation or liability as if the same were fully valid
and enforceable and the Guarantors were jointly and severally the
principal debtors in respect thereof. The Guarantors hereby agree to
keep the Owner fully indemnified on demand against all damages, losses,
costs and expenses arising from
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any failure of the Hirer and/or the Surety to perform or discharge any
such purported obligation or liability.
2.3 Certificates conclusive
Any certificate or determination of the Owner as to the Guaranteed
Liabilities shall, in the absence of manifest error, be binding and
conclusive on and against the Guarantors.
2.4 No security taken by Guarantors
The Guarantors warrant that they have not taken or received, and
undertake that until all the Guaranteed Liabilities of the Hirer and
the Surety have been paid or discharged in full, they will not take or
receive, the benefit of any security from the Hirer or the Surety or
any other person in respect of their obligations under this Guarantee.
2.5 Interest
The Guarantors agree jointly and severally to pay interest on each
amount demanded of them under this guarantee from the date of such
demand until payment (as well after as before judgment) at the Relevant
Rate of Interest calculated on a day to day basis by reference to a
year of 360 days. Such interest shall be compounded at the end of each
period determined for this purpose by the Owner in the event of it not
being paid when demanded but without prejudice to the Owner's right to
require payment of such interest.
2.6 Continuing security and other matters
This Guarantee shall:
(a) secure the ultimate balance from time to time owing to the
Owner by the Hirer or the Surety and shall be a continuing
security, notwithstanding any settlement of account or other
matter whatsoever;
(b) be in addition to any present or future Collateral Instrument,
right or remedy held by or available to the Owner; and
(c) not be in any way prejudiced or affected by the existence of
any such Collateral Instrument, rights or remedies or by the
same becoming wholly or in part void, voidable or unenforceable
on any ground whatsoever or by the Owner dealing with,
exchanging, varying or failing to perfect or enforce any of
the same or giving time for payment or indulgence or
compounding with any other person liable.
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2.7 New accounts
If this Guarantee ceases to be continuing for any reason whatsoever
the Owner may nevertheless continue any account of the Hirer and/or
the Surety or open one or more new accounts and the liability of the
Guarantors under this Guarantee shall not in any manner be reduced or
affected by any subsequent transactions or receipts or payments into
or out of any such account.
2.8 Liability unconditional
The liability of the Guarantors shall not be affected nor shall this
Guarantee be discharged or reduced by reason of:
(a) the Incapacity or any change in the name, style or
constitution of the Hirer or the Surety or any other person
liable;
(b) the Owner granting any time, indulgence or concession to, or
compounding with, discharging, releasing or varying the
liability of, the Hirer or the Surety or any other person
liable or renewing, determining, varying or increasing any
accommodation, facility or transaction or otherwise dealing
with the same in any manner whatsoever or concurring in,
accepting or varying any compromise, arrangement or settlement
or omitting to claim or enforce payment from the Hirer or the
Surety or any other person liable; or
(c) any act or omission which would not have discharged or
affected the liability of any Guarantor had it been a
principal debtor instead of a guarantor or by anything done
or omitted which but for this provision might operate to
exonerate the Guarantors or any of them.
2.9 Collateral Instruments
The Owner shall not be obliged to make any claim or demand on the
Hirer or the Surety or to resort to any Collateral Instrument or other
means of payment now or hereafter held by or available to it before
enforcing this Guarantee and no action taken or omitted by the Owner
in connection with any such Collateral Instrument or other means of
payment shall discharge, reduce, prejudice or affect the liability of
the Guarantors under this Guarantee nor shall the Owner be obliged to
apply any money or other property received or recovered in consequence
of any enforcement or realisation of any such Collateral Instrument or
other means of payment in reduction of the Guaranteed Liabilities.
2.10 Waiver of Guarantors' rights
Until all the Guaranteed Liabilities have been paid, discharged or
satisfied in full (and notwithstanding payment of a dividend in any
liquidation or under any compromise or
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arrangement) each of the Guarantors agrees that, without the prior
written consent of the Owner, it will not:
(a) exercise its rights of subrogation, reimbursement and
indemnity against the Hirer or the Surety or any other person
liable;
(b) except in normal course of business prior to the occurrence of
a Relevant Event demand or accept repayment in whole or in
part of any indebtedness now or hereafter due to the Guarantors
or either of them from the Hirer or the Surety or from any
other person liable or demand or accept any Collateral
Instrument in respect of the same or dispose of the same;
(c) take any step to enforce any right against the Hirer or the
Surety or any other person liable in respect of any Guaranteed
Liabilities; or
(d) claim any set-off or counterclaim against the Hirer or the
Surety or any other person liable or claim or prove in
competition with the Owner in the liquidation of the Hirer
or the Surety or any other person liable or have the benefit
of, or share in, any payment from or composition with, the
Hirer or the Surety or any other person liable or any other
Collateral Instrument now or hereafter held by the Owner for
any Guaranteed Liabilities or for the obligations or
liabilities of any other person liable but so that, if
so directed by the Owner, it will prove for the whole or any
part of its claim in the liquidation of the Hirer or the
Surety or any other person liable on terms that the benefit of
such proof and of all money received by it in respect thereof
shall be held on trust for the Owner and applied in or towards
discharge of the Guaranteed Liabilities in such manner as the
Agent shall deem appropriate.
2.11 Suspense accounts
Any money received in connection with this Guarantee (whether before
or after any Incapacity of the Hirer or the Surety or either of the
Guarantors) may be placed to the credit of a suspense account with a
view to preserving the rights of the Owner to prove for the whole of
its claims against the Hirer or the Surety or any other person liable
or may be applied in or towards satisfaction of such of the Guaranteed
Liabilities as the Owner may from time to time conclusively determine
in its absolute discretion.
2.12 Settlements conditional
Any release, discharge or settlement between the Guarantors or either
of them and the Owner shall be conditional upon no security,
disposition or payment to the Owner by the Hirer or the Surety or any
other person liable being void, set aside or ordered to be refunded
pursuant to any enactment or law relating to bankruptcy, liquidation,
administration or insolvency or for any other reason whatsoever and if
such condition shall not be fulfilled the Owner shall be entitled to
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enforce this Guarantee subsequently as if such release, discharge or
settlement had not occurred and any such payment had not been made.
2.13 Guarantor to deliver up certain property
If, contrary to clauses 2.4 or 2.10, either of the Guarantors takes or
receives the benefit of any security or receives or recovers any money
or other property, such security, money or other property shall be held
on trust for the Owner and shall be delivered to the Owner on demand.
3 PAYMENTS AND TAXES
3.1 No set-off or counterclaim
All payments to be made by the Guarantors under this Guarantee shall
be made in full, without any set-off or counterclaim whatsoever and,
subject as provided in clause 3.2, free and clear of any deductions or
withholdings, in Dollars on the due date to the account of the Owner
referred to in clause 9.1 of the Hire Purchase Agreement.
3.2 Grossing up for Taxes
If at any time either Guarantor is required to make any deduction or
withholding in respect of Taxes from any payment due under this
Guarantee for the account of the Owner (or if the Owner is required to
make any such deduction or withholding from a payment to Owner, the
sum due from the Guarantors in respect of such payment shall be
increased to the extent necessary to ensure that, after the making of
such deduction or withholding, the Owner receives on the due date for
such payment (and retains, free from any liability in respect of such
deduction or withholding) a net sum equal to the sum which it would
have received had no such deduction or withholding been required to be
made and the Guarantors shall jointly and severally indemnify the Owner
against any losses or costs incurred by it by reason of any failure of
either Guarantor to make any such deduction or withholding or by
reason of any increased payment not being made on the due date for such
payment. Each Guarantor shall promptly deliver to the Owner any
receipts, certificates or other proof evidencing the amounts (if any)
paid or payable in respect of any deduction or withholding as
aforesaid. Provided that, as a covenant only and not as a condition
precedent to the payment obligations of the Guarantors hereunder, the
Owner shall co-operate with the Guarantors in providing from time to
time, at the request of the Guarantors, a U.S. Internal Revenue
Service Form 1001 (or successor form) duly executed by the Owner or
such other factual statements and exemptive filings of the Owner as
the Guarantors may reasonably request to eliminate or reduce any
applicable U.S. Federal income tax withholding requirements.
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3.3 Currency indemnity
If any sum due from the Guarantors under this Guarantee or any order
or judgment given or made in relation hereto has to be converted from
the currency (the "first currency") in which the same is payable under
this Guarantee or under such order or judgment into another currency
(the "second currency") for the purpose of (a) making or filing a
claim or proof against the Guarantors or any of them, (b) obtaining an
order or judgment in any court or other tribunal or (c) enforcing any
order or judgment given or made in relation to this Guarantee, the
Guarantors shall jointly and severally indemnify and hold harmless the
Owner from and against any loss suffered as a result of any difference
between (i) the rate of exchange used for such purpose to convert the
sum in question from the first currency into the second currency and
(ii) the rate or rates of exchange at which the Owner may in the
ordinary course of business purchase the first currency with the second
currency upon receipt of a sum paid to it in satisfaction, in whole or
in part, of any such order, judgment, claim or proof. Any amount due
from the Guarantors under this clause 3.3 shall be due as a separate
debt and shall not be affected by judgment being obtained for any
other sums due under or in respect of this Guarantee and the term
"rate of exchange" includes any premium and costs of exchange payable
in connection with the purchase of the first currency with the second
currency.
4 REPRESENTATIONS AND WARRANTIES
4.1 Continuing representations and warranties
The Guarantors represent and warrant that:
(a) Due incorporation
Eagle Geophysical Inc. represents and warrants that it is duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware in the United States of America
and has power to carry on its business as it is now being
conducted and to own its property and other assets and Energy
Research International represents and warrants that it is duly
incorporated and validly existing under the laws of the Cayman
Islands as a limited liability company and has power to carry
on its business as it is now being conducted and to own its
property and other assets.
(b) Corporate power to guarantee
each Guarantor has power to execute, deliver and perform its
obligations under this Guarantee; all necessary corporate,
shareholder and other action has been taken to authorise the
execution, delivery and performance of the same and no
limitation on the powers of any Guarantor to borrow or give
guarantees will be exceeded as a result of this Guarantee;
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(c) Binding obligations
this Guarantee constitutes valid and legally binding
obligations of each of the Guarantors enforceable in
accordance with its terms;
(d) No conflict with other obligations
the execution and delivery of, the performance of its
obligations under, and compliance with the provisions of, this
Guarantee by any Guarantor will not (i) contravene any existing
applicable law, statute, rule or regulation or any judgment,
decree or permit to which the Guarantor is subject, (ii)
conflict with, or result in any breach of any of the terms of,
or constitute a default under, any agreement or other
instrument to which any Guarantor is a party or is subject or
by which it or any of its property is bound, (iii) contravene
or conflict with any provision of any of the Guarantor's
Articles of Incorporation/By-laws/Statutes/Memorandum of
Association/Articles of Association or (iv) result in the
creation or imposition of or oblige any Guarantor to create
any Encumbrance on any of that Guarantor's undertaking,
assets, rights or revenues;
(e) Financial statements correct and complete
the unaudited financial statements of Eagle Geophysical Inc.
(in the form of a Form 10-Q filing) in respect of the fiscal
quarter ended on 30th September 1997 as delivered to the Owner
have been prepared in accordance with generally accepted
accounting principles and practices in the United States of
America which have been consistently applied and present fairly
and accurately the financial position of Eagle Geophysical
Inc. as at such date and the results of the operations of each
of Eagle Geophysical Inc. for the financial quarter period
ended on such date and, as at such date, Eagle Geophysical
Inc. had no significant liabilities (contingent or otherwise)
or any unrealised or anticipated losses which are not disclosed
by, or reserved against or provided for in, such financial
statements;
(f) No filings required
it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of this Guarantee
that it or any other instrument be notarised, filed,
recorded, registered or enrolled in any court, public office or
elsewhere in any Relevant Jurisdiction or that any stamp,
registration or similar tax or charge be paid in any Relevant
Jurisdiction on or in relation to this Guarantee and this
Guarantee is in proper form for its enforcement in the courts
of each Relevant Jurisdiction;
(g) Choice of law
the choice by the Guarantors of English law to govern this
Guarantee and the
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submission by the Guarantors to the non-exclusive jurisdiction
of the English courts is valid and binding on each Guarantor;
(h) No immunity
each Guarantor is subject to civil and commercial law with
respect to its obligations under this Guarantee and the
transactions contemplated thereby constitute private
and commercial acts done for private and commercial purposes
and neither the Guarantors nor any of their respective assets
are entitled to immunity on the grounds of sovereignty or
otherwise from any legal action or proceeding (which shall
include, without limitation, suit, attachment prior to
judgment, execution or other enforcement); and
(i) Consents obtained
every consent, authorisation, licence or approval of, or
registration with or declaration to, governmental or public
bodies or authorities or courts required by each of
the Guarantors to authorise, or required by each of the
Guarantors in connection with, the execution, delivery,
validity, enforceability or admissibility in evidence of
this Guarantee or the performance by either of the Guarantors
of its obligations under this Guarantee has been obtained or
made and is in full force and effect and there has been no
default in the observance of the conditions or restrictions
(if any) imposed in, or in connection with, any of the same;
(j) No default under other Indebtedness
none of the Guarantors is (or would with the giving of notice
or lapse of time or the satisfaction of any other condition or
any combination thereof be) in breach of or in default under
any agreement relating to Indebtedness (other than
Indebtedness of less than US$500,000) to which it is a party or
by which it may be bound.
4.2 Initial representations and warranties
The Guarantors further represent and warrant that:
(a) No material adverse change
there has been no material adverse change in the financial
position of Eagle Geophysical Inc from that set forth in the
financial statements referred to in clause 4.1(f);
(b) Pari passu
the obligations of the Guarantors under this Guarantee are
joint and several, direct, general and unconditional
obligations of the Guarantors and rank at least pari passu
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with all other present and future unsecured and unsubordinated
Indebtedness of the Guarantors with the exception of any
obligations which are mandatorily preferred by law and not by
contract;
(c) No default under other Indebtedness
none of the Guarantors is (nor would with the giving of notice
or lapse of time or the satisfaction of any other condition or
any combination thereof be) in breach of or in default under
any agreement relating to Indebtedness to which it is a party
or by which it may be bound;
(d) Information
the information, exhibits and reports furnished by the
Guarantors to the Owner in connection therewith or with the
negotiation and preparation of this Guarantee are true and
accurate in all material respects and not misleading, do not
omit material facts and all reasonable enquiries have been
made to verify the facts and statements contained therein;
there are no other facts the omission of which would make any
fact or statement therein misleading;
(e) No withholding Taxes
no Taxes are imposed by withholding or otherwise on any
payment to be made by either of the Guarantors under this
Guarantee or are imposed on or by virtue of the execution or
delivery by the Guarantors of this Guarantee or any document
or instrument to be executed or delivered under this
Guarantee; and
(f) Relevant Event
no Relevant Event has occurred and is continuing;
(g) No litigation
no litigation, arbitration or administrative proceeding is
taking place, pending or, to the knowledge of the officers of
the Guarantors, threatened against any Guarantor which in the
opinion of the Owner could reasonably be expected to have a
material adverse effect on the business, assets or financial
condition of that Guarantor.
4.3 Repetition of representations and warranties
On and as of each day from the date of this Guarantee until all moneys
due or owing by the Hirer and the Surety under the Hire Purchase
Agreement and the Hirer's Documents and/or by the Guarantors under this
Guarantee have been paid in full the Guarantors shall (a) be deemed to
repeat the representations and warranties in clause 4.1 (and so that
for this purpose the
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representation and warranty in clause 4.1(f) shall refer to the then
latest audited financial statements delivered to the Owner under
clause 5.1) as if made with reference to the facts and circumstances
existing on each such day and (b) be deemed to further represent and
warrant that the then latest audited financial statements delivered to
the Owner (if any) under clause 5.1 have been prepared in accordance
with generally accepted accounting principles and practices in the
United States of America which have been consistently applied and
present fairly and accurately the financial position of Eagle
Geophysical Inc as at the end of the financial period to which the
same relate and the results of the operations of Eagle Geophysical Inc
for the financial period to which the same relate and, as at the end of
such financial period, Eagle Geophysical Inc did not have any
significant liabilities (contingent or otherwise) any unrealised or
anticipated losses which are not disclosed by, or reserved against or
provided for in, such financial statements.
5 UNDERTAKINGS
5.1 General
The Guarantors undertake that, from the date of this Guarantee and so
long as any moneys are owing under this Guarantee, each of them will:
(a) Notice of default
promptly inform the Owner of any occurrence of which it
becomes aware which might adversely affect the ability of any
Guarantor to perform its obligations under this Guarantee and
of any Relevant Event forthwith upon becoming aware thereof
and will from time to time, if so requested by the Owner,
confirm to the Owner in writing that, save as otherwise stated
in such confirmation, no Relevant Event has occurred and is
continuing;
(b) Consents and licences
without prejudice to clause 4.1, obtain or cause to be
obtained, maintain in full force and effect and comply in all
material respects with the conditions and restrictions (if any)
imposed in, or in connection with, every consent,
authorisation, licence or approval of governmental or public
bodies or authorities or courts and do, or cause to be done,
all other acts and things which may from time to time be
necessary or desirable under applicable law for the continued
due performance of all its obligations under this Guarantee;
(c) Pari passu
ensure that its obligations under this Guarantee shall,
without prejudice to the provisions of clause 5.2, at all
times rank at least pari passu with all its other present and
future unsecured and unsubordinated Indebtedness;
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(d) Financial statements
prepare its financial statements in accordance with generally
accepted accounting principles and practices in the United
States of America (in the case of Eagle Geophysical Inc.)
consistently applied in respect of each financial year and
cause the same to be reported on by the auditors of Eagle
Geophysical Inc. and deliver sufficient copies of the same to
the Owner as soon as practicable but not later than 90 days
after the end of the financial period to which they relate;
(e) Delivery of reports
deliver to the Owner, as many copies as the Owner may
reasonably require of each of the following documents, in each
case at the time of issue thereof:
(i) every report, circular, notice or like document issued
to its shareholders or creditors generally; and
(ii) a certificate from its auditors stating that as at the
date of its latest audited financial statements it was
in compliance with the covenants and undertakings in
clause 5.2 (or if it was not in compliance indicating
the extent of the breach);
(f) Provision of other information
provide the Owner with such financial and other information
concerning it and its affairs as the Owner may from time to
time reasonably require provided that the Owner undertakes
subject to clause 6.4, to keep confidential and not disclose
any such information received in respect of Eagle Geophysical
Inc.
5.2 Negative undertakings
The Guarantors undertake that, from the date of this Guarantee and so
long as any moneys are owing under this Guarantee, neither of them
will, without the prior written consent of the Owner:
(a) No Merger
merge or consolidate with any other company or person; and.
(b) Disposals
allow any Group Company to, and each Guarantor agrees that it
will not itself sell, transfer, lend or otherwise dispose of
or cease to exercise direct control over any part (being either
alone or when aggregated with all other disposals falling to
be taken into
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account pursuant to this clause 5.2(c) material in the opinion
of the Owner in relation to the undertakings, assets, rights
and revenues of the relevant Guarantor and all Group
Companies taken as a whole) of its present or future
undertaking, assets, rights or revenues (otherwise than by (i)
transfers, sales or disposals for full consideration or (ii)
pledges in connection with bona fide lending transactions, in
each case in the ordinary course of trading) whether by one or
a series of transactions related or not.
6 BENEFIT OF THIS GUARANTEE
6.1 Benefit and burden
This Guarantee shall be binding upon each Guarantor and its successors
in title and shall enure for the benefit of the Owner, its Assignees
and Transferees. The Guarantors expressly acknowledge and accept the
provisions of clause 30 of the Hire Purchase Agreement and agree that
any person in favour of whom an assignment or a transfer is made in
accordance with such clause shall be entitled to the benefit of this
Guarantee.
6.2 Changes in constitution or reorganisation
For the avoidance of doubt and without prejudice to the provisions of
clause 7.1, this Guarantee shall remain binding on the Guarantors
notwithstanding any change in the constitution of the Owner or its
absorption in, or amalgamation with, or the acquisition of all or part
of its undertaking or assets by, any other person, or any
reconstruction or reorganisation of any kind, to the intent that this
Guarantee shall remain valid and effective in all respects in favour
of any assignee, transferee or other successor in title of the Owner
in the same manner as if such assignee, transferee or other successor
in title had been named in this Guarantee as a party instead of, or in
addition to the Owner.
6.3 No assignment by Guarantor
No Guarantor may assign or transfer any of their rights or obligations
under this Guarantee.
6.4 Disclosure of information
The Owner may (other than to a financial institution) with the prior
written consent of the Guarantors (not to be unreasonably withheld)
disclose to a prospective assignee or transferee or to any other person
who may propose entering into contractual relations with the Owner in
relation to the Hire Purchase Agreement such information about the
Guarantors or any of them as the Owner shall consider appropriate.
7 NOTICES AND OTHER MATTERS
7.1 Notice
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Every notice, request, demand or other communication under this
Guarantee shall:
(a) be in writing delivered personally or by prepaid first class
letter or facsimile transmission (confirmed in the case of a
facsimile transmission by prepaid first class letter sent
within 24 hours of despatch but so that the non-receipt of
such confirmation shall not affect in any way the validity of
the facsimile transmission in question);
(b) be deemed to have been received, subject as otherwise provided
in this Guarantee, in the case of a facsimile transmission, at
the time of despatch with confirmation that the communication
was well received (provided that, in the case of a facsimile
transmission, if the date of despatch is not a business day in
the country of the addressee it shall be deemed to have been
received at the opening of business on the next such business
day) and in the case of a letter, when delivered personally or
five (5) days after being put in the post;
(c) be sent:
(1) to the Owner to
4 Melville Street
Edinburgh EH3 7NS
Scotland
Fax: 0131 243 8423
(Attention: Managing Director/The Company Secretary)
(2) to Eagle Geophysical Inc to:
50 Briar Hollow West
6th Floor
Houston
Texas 77027
United States of America
Fax: 001 713 881 2853
(Attention: Chief Financial Officer)
(3) to Energy Research International to:
Horizon Exploration Limited
Horizon House
Suffolk Way
Sevenoaks
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Kent TN13 1YL
England
Fax: 01732 742977
(Attention: Neil Campbell)
or to such other address or facsimile number as is notified by
one party to the other under this Guarantee.
7.2 No implied waivers, remedies cumulative
No failure or delay on the part of the Owner to exercise any power,
right or remedy under this Guarantee shall operate as a waiver
thereof, nor shall any single or partial exercise by the Owner of any
power, right or remedy preclude any other or further exercise thereof
or the exercise of any other power, right or remedy. The remedies
provided in this Guarantee are cumulative and are not exclusive of any
remedies provided by law.
7.3 English translations
All certificates, instruments and other documents to be delivered
under or supplied in connection with this Guarantee shall be in the
English language or shall be accompanied by a certified English
translation upon which the Owner shall be entitled to rely.
7.4 Other guarantors
The Guarantors agree to be bound by this Guarantee notwithstanding
that any other person intended to execute or to be bound by any other
guarantee or assurance under or pursuant to the Agreement may not do so
or may not be effectually bound and notwithstanding that such other
guarantee or assurance may be determined or be or become invalid or
unenforceable against any other person, whether or not the deficiency
is known to the Owner.
7.5 Expenses
The Guarantors agree jointly and severally to reimburse the Owner on
demand for all legal and other costs, charges and expenses on a full
and unqualified indemnity basis which may be incurred by the Owner in
relation to the enforcement of this Guarantee against either or both
of the Guarantors.
8 GUARANTORS' OBLIGATIONS
8.1 Guarantor's obligations
Notwithstanding anything to the contrary contained in this Guarantee
or any of the Relevant Documents, the agreement, obligations and
liabilities of the Guarantors herein contained are
16
<PAGE> 19
joint and several and shall be construed accordingly. Each of the
Guarantors agrees and consents to be bound by this Guarantee
notwithstanding that the other Guarantors which is intended to sign or
to be bound may not do so or be effectually bound and notwithstanding
that this Guarantee may be invalid or unenforceable against the other
Guarantor, whether or not the deficiency is known to the Owner. The
Owner shall be at liberty to release either of the Guarantors from
this Guarantee and to compound with or otherwise vary and agree to
vary the liability or to grant time and indulgence to make other
arrangements with either of the Guarantors without prejudicing or
affecting the rights and remedies of the Owner against the other
Guarantor.
9 LAW AND JURISDICTION
9.1 Law
This Guarantee is governed by and shall be construed in accordance
with English law.
9.2 Submission to jurisdiction
Each of the Guarantors agrees for the benefit of the Owner that any
legal action or proceedings arising out of or in connection with this
Guarantee against the Guarantors or any of them or any of its assets
may be brought in the English courts, irrevocably and unconditionally
submit to the jurisdiction of such courts and irrevocably designates,
appoints and empowers Horizon Exploration Limited at present of Horizon
House, 1 Suffolk Way, Sevenoaks, Kent TN13 1YL to receive for it and
on its behalf, service of process issued out of the English courts in
any such legal action or proceedings. The submission to such
jurisdiction shall not (and shall not be construed so as to) limit the
right of the Owner to take proceedings against either or both of
the Guarantors in the courts of any other competent jurisdiction, nor
shall the taking of proceedings in any one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction, whether
concurrently or not. The Guarantors further agree that only the
courts of England and not those of any other State shall have
jurisdiction to determine any claim which the Guarantor may have
against the Owner arising out of or in connection with this Guarantee.
IN WITNESS whereof the parties to this Guarantee have caused this Guarantee to
be duly executed as a deed on the date first above written.
17
<PAGE> 20
Signed, Sealed and Delivered as )
a DEED by EAGLE GEOPHYSICAL INC. )
acting by its duly authorised officers: )
/s/ G. M. HARRISON
- -----------------------------------
Authorised Officer
/s/ GEORGE PURDIE
- -----------------------------------
Authorised Officer
Signed, Sealed and Delivered as )
a DEED by ENERGY RESEARCH )
INTERNATIONAL )
acting by its duly authorised officers: )
/s/ NEIL A.M. CAMPBELL
- -----------------------------------
Authorised Officer
/s/ G. M. HARRISON
- -----------------------------------
Authorised Officer
Signed, Sealed and Delivered as )
a DEED by John N. Coppard )
for and on behalf of BRITISH LINEN SHIPPING )
LIMITED acting by John N. Coppard its duly )
appointed Attorney pursuant to a power of ) /s/ JOHN COPPARD
attorney dated 30 March 1998 in the )
presence of: ) Attorney-in-Fact
/s/ G. HALL
- -----------------------------------
Witness
Name: Gordon Hall
Address: Norton Rose, London
Occupation: Solicitor
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO
LOAN AGREEMENT DATED OCTOBER 21, 1997
BY AND AMONG
EAGLE GEOPHYSICAL, INC., EAGLE GEOPHYSICAL ONSHORE, INC., EAGLE GEOPHYSICAL
OFFSHORE, INC., EAGLE GEOPHYSICAL DE MEXICO, INC. and EAGLE GEOPHYSICAL GOM,
INC. (FORMERLY KNOWN AS EAGLE GEOPHYSICAL OFFSHORE, INC.)
AND
BANK ONE, TEXAS, N.A.
This First Amendment to Loan Agreement dated October 21, 1997 is entered
into as of June 10, 1998, (this "First Amendment") by and among EAGLE
GEOPHYSICAL, INC., a Delaware corporation (herein sometimes referred to as the
"Parent Borrower"), EAGLE GEOPHYSICAL ONSHORE, INC., a Delaware corporation,
EAGLE GEOPHYSICAL OFFSHORE, INC., a Delaware corporation, EAGLE GEOPHYSICAL DE
MEXICO, INC., a Delaware corporation, and EAGLE GEOPHYSICAL GOM, INC., a Texas
corporation (formerly known as Eagle Geophysical Offshore, Inc.) (collectively,
together with the Parent Borrower, referred to as the "Borrower"), and BANK ONE,
TEXAS, N.A., a national banking association (the "Bank").
W I T N E S S E T H:
Borrower and Bank entered into a Loan Agreement dated October 21, 1997
(the "Loan Agreement").
Parent Borrower and Bank executed that certain Unsecured Advancing Line
of Credit Agreement (the "Advancing Loan") dated June 5, 1998.
Each Borrower, in addition to Parent Borrower, will benefit from the
proceeds under the Advancing Loan.
Bank entered into the Advancing Loan and is willing to enter into this
First Amendment, subject to and conditioned upon the provisions set forth
herein.
NOW, THEREFORE, in consideration of the promises herein contained, and
each intending to be legally bound hereby, the parties agree as follows:
I. Amendments to Loan Agreement.
The Preamble of the Loan Agreement is hereby amended by deleting the word
"and" immediately preceding the text "EAGLE GEOPHYSICAL GOM, INC." and is
further amended by adding a comma immediately following the parenthetical text,
"(formerly known as Eagle Geophysical Offshore, Inc.)," and then adding the
following text after the comma:
<PAGE> 2
EAGLE FRONT END SERVICES, LTD., a Texas limited partnership, and EAGLE
GEOPHYSICAL MANAGEMENT, INC., a Delaware corporation
Article I of the Loan Agreement is hereby amended by revising the
following definition in its entirety to read as follows:
"Maturity Date" means June 1, 1999.
Article I of the Loan Agreement is further amended by adding the
following new definitions:
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
consolidated net income, plus consolidated interest expense, plus
consolidated tax expenses, plus depreciation and amortization, plus
consolidated non-cash charges deducted from consolidated net income, to
(b) consolidated interest expense, all calculated in accordance with
GAAP.
"First Amendment" shall mean that certain First Amendment to the
Loan Agreement, entered into by and among Bank and Borrower on June 10,
1998.
"High Yield Debt Offering" means that certain contemplated
offering of up to $100,000,000 of Senior Notes issued by Parent Borrower
on terms substantially as set forth in the Summary of Indicative 144A
Offering Terms dated May 5, 1998, prepared by Prudential Securities
Incorporated, and otherwise acceptable to Bank in its discretion (it
being understood that Bank has no objection to the amount of such
offering exceeding $100,000,000).
Articles III and IV of the Loan Agreement are hereby amended so that,
with respect to Eagle Front End Services, Ltd., references in each and every
section of such articles to corporate terms such as "incorporation,"
"corporation," "corporate action," "corporate power," "articles of
incorporation," "bylaws, " and the like, shall be deemed amended to the most
closely analogous terms as applied to limited partnerships, and actions to be
taken by the board of directors or officers of any Borrower shall be deemed
amended to refer to the board of directors or officers, as applicable, of Eagle
Geophysical Management, Inc., as general partner of Eagle Front End Services,
Ltd.
Section 4.16 of the Loan Agreement is hereby amended by adding
immediately preceding the semicolon at the end of Subsection (A) the following:
", as of Closing".
Section 5.03 of the Loan Agreement is hereby amended by replacing the
text of that section in its entirety with the following:
5.03 Monthly Unaudited Financial Statements of Borrower. Deliver
to Bank, on or before the sixtieth (60th) day after the end of each
calendar month, unaudited
2
<PAGE> 3
consolidated and consolidating Financial Statements of Borrower and its
Subsidiaries as at the end of such month and from the beginning of each
fiscal year to the end of each such month, which Financial Statements
shall be certified by the president or chief financial officer of
Borrower as being true and correct, subject to changes resulting from
year-end audit adjustments.
Section 5.05 of the Loan Agreement is hereby amended by replacing the
text of that section in its entirety with the following:
5.05 Compliance Certificate. Deliver to Bank a Compliance
Certificate: (a) at the time of Borrower's execution of this Agreement,
and (b) on the first day of each month thereafter prior to the Maturity
Date.
Section 5.22 of the Loan Agreement is hereby amended by replacing the
contents of that section in its entirety with the following:
5.22 Maximum Funded Senior Debt and Capital Leases to
Capitalization. Maintain a ratio between: (a) the sum of the outstanding
balance at any time, and from time to time, of Senior Debt plus the
remaining obligatory payments on all capital leases of Borrower on a
consolidated basis, and (b) the sum of the outstanding balance at any
time, and from time to time, of Senior Debt, plus the remaining
obligatory payments under capital leases of Borrower on a consolidated
basis, plus the Tangible Net Worth, of not greater than the following:
.45 to 1.00 at June 30, 1998; .70 to 1.00 at closing of the High Yield
Debt Offering and at September 30, 1998; and .50 to 1.00 on December 31,
1998 and thereafter; provided, however, that Bank shall have the right to
adjust the ratios set forth in this Section if Parent Borrower fails to
consummate the High Yield Debt Offering by September 4, 1998, or if
Parent Borrower raises additional equity, in which event the adjusted
ratios shall be determined by Bank, in its discretion, based on its
then-prevailing credit policies and parameters, as applied to similarly
situated borrowers.
Article V of the Loan Agreement is further amended by adding the
following new section:
5.31 Interest Coverage Ratio. Maintain a Consolidated Fixed
Charge Coverage Ratio for the preceding four full fiscal quarters for
which quarterly Financial Statements are available of not less than 2.7
to 1.0.
Section 7.01 of the Loan Agreement is hereby amended by replacing the
period at the end of subsection (j) with a semicolon, followed by the word
"and," and then adding the following new subsection:
(k) An "Event of Default," as defined in the Advancing Loan Agreement,
has occurred and is continuing.
3
<PAGE> 4
The Signature Page of the Loan Agreement is hereby amended to add the
signature block and authorized signature on behalf of Eagle Front End Services,
Ltd., and Eagle Geophysical Management, Inc. as set forth on this First
Amendment, in their capacity as Borrowers.
"Exhibit A," the form of Revolving Note, attached to the Loan Agreement
is hereby replaced with Exhibit A attached to the First Amendment.
"Exhibit B,"the form of Compliance Certificate, attached to the Loan
Agreement is hereby replaced with Exhibit B attached to the First Amendment.
"Schedule 4.14," the list of the Parent Borrower's Subsidiaries, attached
to the Loan Agreement is hereby amended to add thereto Eagle Front End Services,
Inc. and Eagle Geophysical Management, Inc., both Delaware corporations with
principal places of business in Houston, Texas, and Eagle Front End Services,
Ltd., a Texas limited partnership with its principal place of business in
Houston, Texas.
II. Conditions to First Amendment. This First Amendment shall not become
effective until the following conditions have been satisfied:
A. Bank shall have received the Note (in the form attached as Exhibit A
to the First Amendment), multiple counterparts of the First Amendment, as
requested by Bank, and the Certificate of Compliance (in the form
attached as Exhibit B to the First Amendment), all duly executed on
behalf of each Borrower.
B. Bank shall have received the Security Instruments, duly executed on
behalf of Eagle Front End Services, Ltd. and Eagle Geophysical
Management, Inc., in substantially the same form as was required with
respect to each of the other Borrowers pursuant to Section 3.15 of the
Loan Agreement.
C. The requirements of Sections 3.02, 3.03, 3.04 and 3.05 of the Loan
Agreement shall be satisfied with respect to both Eagle Front End
Services, Ltd. and Eagle Geophysical Management, Inc., except that, with
respect to Eagle Front End Services, Ltd., references in such sections to
Articles of Incorporation and Bylaws shall be deemed to refer to the
Certificate of Limited Partnership and the Limited Partnership Agreement,
references therein to a corporation shall be deemed to refer to a limited
partnership, references therein to being incorporated shall be deemed
references to being formed, and, with respect to Eagle Front End
Services, Ltd., the requirements of Section 3.03 shall be satisfied by
actions of the board of directors and officers of Eagle Geophysical
Management, Inc., in its capacity as general partner of Eagle Front End
Services, Ltd.
D. Bank shall have received an Opinion of Counsel with respect to Eagle
Front End Services, Ltd., in its capacity as a Borrower, and with respect
to Eagle Geophysical Management, Inc., in its dual capacity as Borrower
and as general partner of Eagle Front
4
<PAGE> 5
End Services, Ltd., in substantially the form that was previously
delivered pursuant to Section 3.08 of the Loan Agreement, and with such
modifications as are necessary to account for the limited partnership
status of Eagle Front End Services, Ltd.
III. Extent of Amendments. This First Amendment shall not be deemed to be an
amendment by Bank of any covenant, condition or obligation on the part of the
Borrower under the Loan Agreement, as amended hereby, except as expressly set
forth herein. In addition, this First Amendment shall in no respect evidence any
commitment by the Bank to grant any future amendments of any covenant, condition
or obligation on the part of the Borrower under the Loan Agreement, as amended
hereby. Any further amendments, waivers or consents must be specifically agreed
to in writing in accordance with Section 8.12 of the Loan Agreement.
IV. Reaffirmation of Representations and Warranties. To induce the Bank to
enter into this First Amendment, the Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Section 4 of the Loan
Agreement and in all other documents executed pursuant thereto, and additionally
represents and warrants as follows:
A. The execution and delivery of this First Amendment and the performance
of Borrower of its obligations under this First Amendment are within
Borrower's power, have been duly authorized by all necessary corporate
action, have received all necessary governmental approval (if any shall
be required), and do not and will not contravene or conflict with any
provision of law or of the charter or by-laws of the Borrower or of any
agreement binding upon Borrower.
B. This First Amendment represents the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with its terms subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally.
C. Since the date of the Loan Agreement, no change, event or state of
affairs has occurred and is continuing which would constitute an event of
default as described in Section 7.01 of the Loan Agreement.
V. Defined Terms. Terms used herein that are defined in the Loan Agreement
shall have the same meanings herein, unless the context otherwise requires.
VI. Reaffirmation of Loan Agreement. This First Amendment shall be deemed to
be an amendment to the Loan Agreement, and the Loan Agreement, as amended
hereby, is hereby ratified, adopted and confirmed in each and every respect.
VII. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. This First Amendment has been
5
<PAGE> 6
entered into in Harris County, Texas, and it shall be performable for all
purposes in Harris County, Texas. Courts within the State of Texas shall have
jurisdiction over any and all disputes between the Borrower and the Bank,
whether in law or equity, including, but not limited to, any and all disputes
arising out of or relating to this First Amendment or any other Loan Documents;
and venue in any such dispute whether in federal or state court shall be laid in
Harris County, Texas.
VIII. Severability. Whenever possible each provision of this First Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this First Amendment.
IX. Execution in Counterparts. This First Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts on
different dates, and each such counterpart shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
agreement.
X. Section Captions. Section captions used in this First Amendment are for
convenience of reference only, and shall not affect the construction of this
First Amendment.
XI. Successors and Assigns. This First Amendment shall be binding upon the
Borrower, the Bank and its respective successors and assigns, and shall inure to
the benefit of the Borrower, the Bank and the respective successors and assigns
of the Bank.
XII. Non-Application of Chapter 15 of Texas Credit Code. The provisions of
Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
this First Amendment or any of the other Loan Documents or to the transactions
contemplated hereby.
XIII. Notice. THE LOAN AGREEMENT, AS HEREBY AMENDED, EMBODIES THE ENTIRE
AGREEMENT BETWEEN THE BORROWER AND THE BANK AND SUPERSEDES ALL PRIOR PROPOSALS,
AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER HEREOF. THE
BORROWER CERTIFIES THAT IT IS RELYING ON NO REPRESENTATION, WARRANTY, COVENANT
OR AGREEMENT EXCEPT FOR THOSE SET FORTH IN THE LOAN AGREEMENT, AS HEREBY
AMENDED, AND THE OTHER DOCUMENTS PREVIOUSLY EXECUTED IN CONNECTION THEREWITH.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the day and year first above written.
BORROWER:
EAGLE GEOPHYSICAL, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL ONSHORE, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL OFFSHORE, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL DE MEXICO, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL GOM, INC. (f/k/a
EAGLE GEOPHYSICAL OFFSHORE, INC.)
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
7
<PAGE> 8
EAGLE FRONT END SERVICES, LTD.,
a Texas limited partnership
By: Eagle Geophysical Management, Inc.,
its general partner
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL MANAGEMENT, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ Linda F. Masera
----------------------------------
Linda F. Masera
Vice President
8
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED
REVOLVING NOTE
$20,000,000.00 Houston, Texas June 10, 1998
On the dates hereinafter prescribed, for value received, EAGLE
GEOPHYSICAL, INC., a Delaware corporation, EAGLE GEOPHYSICAL ONSHORE, INC., a
Delaware corporation, EAGLE GEOPHYSICAL OFFSHORE, INC., a Delaware corporation,
EAGLE GEOPHYSICAL DE MEXICO, INC., a Delaware corporation, EAGLE GEOPHYSICAL
GOM, INC., a Texas corporation (formerly known as Eagle Geophysical Offshore,
Inc.), EAGLE FRONT END SERVICES, LTD., a Texas limited partnership, and EAGLE
GEOPHYSICAL MANAGEMENT, INC., a Delaware corporation (collectively the
"Borrower"), having an address at 50 Briar Hollow Lane, 6th Floor West, Houston,
Texas 77027, promises to pay to the order of BANK ONE, TEXAS, N.A. (herein
called "Bank"), at its principal offices at 910 Travis, Houston, Harris County,
Texas 77002, (i) the principal amount of TWENTY MILLION AND NO/100 DOLLARS
($20,000,000.00) or the principal amount advanced pursuant to the terms of the
Loan Agreement (defined herein) as of the date of maturity hereof, whether by
acceleration or otherwise, whichever may be the lesser, and (ii) interest on the
principal balance from time to time advanced and remaining unpaid from the date
of the advance until maturity at a rate of interest equal to lesser of (a) the
"Interest Rate" (as defined in the Loan Agreement), or (b) the Maximum Rate (as
hereinafter defined). Any increase or decrease in interest rate resulting from a
change in the Maximum Rate shall be effective immediately when such change
becomes effective, without notice to Borrower, unless Applicable Law (as defined
below) requires that such increase or decrease not be effective until a later
time, in which event such increase or decrease shall be effective at the
earliest time permitted under the provisions of such law.
Notwithstanding the foregoing, if during any period the Interest
Rate exceeds the Maximum Rate, the rate of interest in effect on this Note shall
be limited to the Maximum Rate during each such period, but at all times
thereafter the rate of interest in effect on this Note shall be the Maximum Rate
until the total amount of interest accrued on this Note equals the total amount
of interest which would have accrued hereon if the Floating Rate had at all
times been in effect.
All payments on this Note shall be applied first to accrued interest
and the balance, if any, to principal.
This Note is a revolving credit note and it is contemplated that by
reason of prepayments hereon there may be times when no indebtedness is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder subsequent
to each such occurrence. Each principal advance and each payment hereof made
pursuant to this Note shall be reflected by Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid, accrued interest remaining outstanding on
this Note.
<PAGE> 2
"Maximum Rate" means the Maximum Rate of non-usurious interest
permitted from day to day by applicable law, including as to Article 5069-1.04,
Vernon's Texas Revised Civil Statutes Annotated (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated weekly rate ceiling."
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that Article 1.04, Title 79, Revised Civil Statutes of Texas,
1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil Statutes)
shall be included in the laws of the State of Texas in determining Applicable
Law; and for the purpose of applying said Article 1.04 to this Note, the
interest ceiling applicable to this Note under said Article 1.04 shall be the
indicated weekly rate ceiling from time to time in effect. Borrower and Bank
hereby agree that Chapter 15 of Subtitle 3, Title 79, Revised Civil Statutes of
Texas, 1925, as amended, shall not apply to this Note or the loan transaction
evidenced by, and referenced in, the Loan Agreement (hereinafter defined) in any
manner, including without limitation, to any account or arrangement evidenced or
created by, or provided for in, this Note.
"Business Day" shall mean any day on which banks are open for
general banking business in the State of Texas, other than a Saturday, a Sunday,
a legal holiday or any other day on which banks in the State of Texas are
required or authorized by law or executive order to close.
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before the Maturity Date, as prescribed in the Loan Agreement; interest to
accrue upon the principal sum from time to time owing and unpaid hereunder shall
be due and payable in monthly installments, as it accrues, with the first such
monthly installment of interest hereon being due and payable on the first day of
July 1998, and with such subsequent installments of interest being due and
payable on the first day of each succeeding month thereafter; provided, however,
the final installment of interest hereunder shall be due and payable not later
than the maturity of the principal sum hereof, howsoever such maturity may be
brought about.
When the first (1st) day of a calendar month falls upon a Saturday,
Sunday or legal holiday, the payment of interest and principal, if any, due upon
such date shall be due and payable upon the next succeeding Business Day.
In no event shall the aggregate of the interest on this Note, plus
any other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
Bank and Borrower specifically intend and agree to limit contractually the
interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or
___________
INITIAL FOR
IDENTIFICATION
2
<PAGE> 3
securing this Note shall ever be construed to create a contract to pay interest
at a rate in excess of the Maximum Rate, and neither Borrower nor any other
party liable herefor shall ever be liable for interest in excess of that
determined at the Maximum Rate, and the provisions of this paragraph shall
control over all provisions of this Note or of any other instruments pertaining
to or securing this Note. If any amount of interest taken or received by Bank
shall be in excess of the maximum amount of interest which, under Applicable
Law, could lawfully have been collected on this Note, then the excess shall be
deemed to have been the result of a mathematical error by the parties hereto and
shall be refunded promptly to Borrower. All amounts paid or agreed to be paid in
connection with the indebtedness evidenced by this Note which would under
Applicable Law be deemed "Interest" shall, to the extent permitted by Applicable
Law, be amortized, prorated, allocated and spread throughout the full term of
this Note.
This Note is secured by all security agreements, collateral
assignments, mortgages and lien instruments executed by Borrower (or by any
other party) in favor of Bank, including those executed simultaneously herewith,
those executed heretofore and those hereafter executed, and including
specifically and without limitation the "Security Instruments" described and
defined in the Revolving Credit Agreement dated October 21, 1997, as amended,
between Borrower and Bank (the "Loan Agreement").
This Note is issued in substitution for, and in replacement,
modification, rearrangement, renewal and extension of, but not in extinguishment
of, the outstanding principal indebtedness evidenced by that certain Promissory
Note dated October 21, 1997 in the face amount of $20,000,000.00 (the "Prior
Revolving Note") executed by Borrower and payable to the order of Bank; it being
acknowledged and agreed by Borrower and Bank, that the indebtedness evidenced by
this Note constitutes an extension and renewal of the outstanding principal
indebtedness evidenced by the Prior Revolving Note, and that all security
interests and other liens which secure the repayment of the Prior Revolving Note
shall continue to secure the indebtedness evidenced by this Note.
Reference is hereby made to the Loan Agreement for a statement of
the rights and obligations of the holder of this Note and the duties and
obligations of Borrower in relation thereto; but neither this reference to the
Loan Agreement nor any provisions thereof shall affect or impair the absolute
and unconditional obligation of Borrower to pay any outstanding and unpaid
principal of and interest on this Note when due, in accordance with the terms of
the Loan Agreement. Each advance and each payment made pursuant to this Note
shall be reflected by notations made by Bank on its records and the aggregate
unpaid amounts reflected by the notations on the records of Bank shall be deemed
rebuttably presumptive evidence of the principal amount owing under this Note.
In the event of default in the payment when due of any of the
principal of or any interest on this Note, or in the event of default under the
terms of the Loan Agreement or any of the Security Instruments, or if any event
occurs or condition exists which authorizes the acceleration of the maturity of
this Note under any agreement made by Borrower, Bank (or other holder of this
Note)
___________
INITIAL FOR
IDENTIFICATION
3
<PAGE> 4
may, at its option, without presentment or demand or any notice to Borrower or
any other person liable herefor, declare the unpaid principal balance of and
accrued interest on this Note to be immediately due and payable.
If this Note is collected by suit or through the Probate or
Bankruptcy Court, or any judicial proceeding, or if this Note is not paid at
maturity, however such maturity may be brought about, and is placed in the hands
of an attorney for collection, then Borrower agrees to pay reasonable
attorneys(1) fees, not to exceed 10% of the full amount of principal and
interest owing hereon at the time this Note is placed in the hands of an
attorney.
Borrower and all sureties, endorsers and guarantors of this Note
waive demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for Bank, in order to enforce payment of this Note by them, to first institute
suit or exhaust its remedies against any Borrower or others liable herefor, or
to enforce its rights against any security herefor, and consent to any one or
more extensions or postponements of time of payment of this Note on any terms or
any other indulgences with respect hereto, without notice thereof to any of
them. Bank may transfer this Note, and the rights and privileges of Bank under
this note shall inure to the benefit of Bank's representatives, successors or
assigns.
Executed this 10th day of June, 1998.
EAGLE GEOPHYSICAL, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL ONSHORE, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
4
<PAGE> 5
EAGLE GEOPHYSICAL OFFSHORE, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL DE MEXICO, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL GOM, INC. (F/K/A
EAGLE GEOPHYSICAL OFFSHORE, INC.)
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
EAGLE FRONT END SERVICES, LTD.,
a Texas limited partnership
By: Eagle Geophysical Management, Inc.,
its general partner
By: /s/ Richard W. McNairy
-------------------------------
Richard W. McNairy
Vice President
EAGLE GEOPHYSICAL MANAGEMENT, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President
5
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO
LOAN AGREEMENT DATED OCTOBER 21, 1997
BY AND AMONG
HORIZON EXPLORATION LIMITED
AND
BANK ONE, TEXAS, N.A.
This First Amendment to Loan Agreement dated October 21, 1997 is entered
into as of June 10, 1998 (this "First Amendment") by and between HORIZON
EXPLORATION LIMITED, an English company with Registered Number 2804983, having
its Registered Office at Napier House, 14-16 Mount Ephraim Road, Tunbridge
Wells, Kent TN1 1EE ("Borrower"), and BANK ONE, TEXAS, N.A., a national banking
association (the "Bank").
W I T N E S S E T H:
Borrower and Bank entered into a Loan Agreement dated October 21, 1997
(the "Loan Agreement").
Ultimate Parent and Bank executed that certain Unsecured Advancing Line
of Credit Agreement (the "Advancing Loan") dated June 5, 1998.
Borrower will, in addition to Ultimate Parent, benefit from the proceeds
under the Advancing Loan.
Bank entered into the Advancing Loan and is willing to enter into this
First Amendment, subject to and conditioned upon the provisions set forth
herein.
NOW, THEREFORE, in consideration of the promises herein contained, and
each intending to be legally bound hereby, the parties agree as follows:
I. Amendments to Loan Agreement.
Article I of the Loan Agreement is hereby amended by revising the
following definition in its entirety to read as follows:
"Maturity Date" means June 1, 1999.
Article I of the Loan Agreement is further amended by adding the
following new definitions:
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
consolidated net income, plus consolidated interest expense, plus
consolidated tax expenses, plus
<PAGE> 2
depreciation and amortization, plus consolidated non-cash charges
deducted from consolidated net income, to (b) consolidated interest
expense, all calculated in accordance with GAAP.
"First Amendment" shall mean that certain First Amendment to the
Loan Agreement, entered into by and among Bank and Borrower on June 10,
1998.
"High Yield Debt Offering" means that certain contemplated
offering of up to $100,000,000 of Senior Notes issued by Ultimate Parent
on terms substantially as set forth in the Summary of Indicative 144A
Offering Terms dated May 5, 1998, prepared by Prudential Securities
Incorporated, and otherwise acceptable to Bank in its discretion (it
being understood that Bank has no objection to the amount of such
offering exceeding $100,000,000).
Section 4.16 of the Loan Agreement is hereby amended by adding
immediately preceding the semicolon at the end of Subsection (A) the following:
", as of Closing".
Article V of the Loan Agreement is hereby amended as follows:
Section 5.03 of the Loan Agreement is hereby amended by replacing the
text of that section in its entirety with the following:
5.03 Monthly Unaudited Financial Statements of Borrower. (a) Cause
the Ultimate Parent to deliver to Bank, on or before the sixtieth (60th)
day after the end of each calendar month, unaudited consolidated and
consolidating Financial Statements of Borrower and its Subsidiaries as at
the end of such month and from the beginning of each fiscal year to the
end of each such month, which Financial Statements shall be certified by
the president or chief financial officer of Borrower as being true and
correct, subject to changes resulting from year-end audit adjustments;
and (b) deliver to Bank, on or before the sixtieth (60th) day after the
end of each calendar month, unaudited internal consolidating Financial
Statements of Borrower and its Subsidiaries as at the end of such month
and from the beginning of each fiscal year to the end of each such month,
which Financial Statements shall be certified by the president or chief
financial officer of Borrower as being true and correct, subject to
changes resulting from year-end audit adjustments.
Section 5.05 is hereby amended by replacing the contents of that section
in its entirety with the following:
5.05 Compliance Certificate. Deliver to Bank a Compliance
Certificate: (a) at the time of Borrower's execution of this Agreement,
and (b) on the first day of each month thereafter prior to the Maturity
Date.
2
<PAGE> 3
Section 5.19 of the Loan Agreement is amended by replacing the following
clause therein "Sections 5.19 through 5.22" with the following clause: "Sections
5.19 through 5.22 and 5.31".
Section 7.01 of the Loan Agreement is hereby amended by replacing the
period at the end of subsection (j) with a semicolon, followed by the word
"and," and then adding the following new subsection:
(k) An "Event of Default," as defined in the Advancing Loan Agreement,
has occurred and is continuing.
"Exhibit B" attached to and incorporated to the Loan Agreement is hereby
replaced with Exhibit B attached to this First Amendment and is incorporated
herein for all purposes.
II. Conditions to First Amendment. This First Amendment shall not become
effective until Bank shall have received multiple counterparts of the First
Amendment, as requested by Bank, and the Certificate of Compliance (in the form
attached as Exhibit B to the First Amendment), all duly executed on behalf of
Borrower.
III. Extent of Amendments. This First Amendment shall not be deemed to be an
amendment by Bank of any covenant, condition or obligation on the part of the
Borrower under the Loan Agreement, as amended hereby, except as expressly set
forth herein. In addition, this First Amendment shall in no respect evidence any
commitment by the Bank to grant any future amendments of any covenant, condition
or obligation on the part of the Borrower under the Loan Agreement, as amended
hereby. Any further amendments, waivers or consents must be specifically agreed
to in writing in accordance with Section 8.12 of the Loan Agreement.
IV. Reaffirmation of Representations and Warranties. To induce the Bank to
enter into this First Amendment, the Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Section 4 of the Loan
Agreement and in all other documents executed pursuant thereto, and additionally
represents and warrants as follows:
A. The execution and delivery of this First Amendment and the performance
of Borrower of its obligations under this First Amendment are within
Borrower's power, have been duly authorized by all necessary corporate
action, have received all necessary governmental approval (if any shall
be required), and do not and will not contravene or conflict with any
provision of law or of the charter or by-laws of the Borrower or of any
agreement binding upon Borrower.
B. This First Amendment represents the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with its terms subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally.
3
<PAGE> 4
C. Since the date of the Loan Agreement, no change, event or state of
affairs has occurred and is continuing which would constitute an event of
default as described in Section 7.01 of the Loan Agreement.
V. Defined Terms. Terms used herein that are defined in the Loan Agreement
shall have the same meanings herein, unless the context otherwise requires.
VI. Reaffirmation of Loan Agreement. This First Amendment shall be deemed to
be an amendment to the Loan Agreement, and the Loan Agreement, as amended
hereby, is hereby ratified, adopted and confirmed in each and every respect.
VII. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. This First Amendment has been entered into in Harris
County, Texas, and it shall be performable for all purposes in Harris County,
Texas. Courts within the State of Texas shall have jurisdiction over any and all
disputes between the Borrower and the Bank, whether in law or equity, including,
but not limited to, any and all disputes arising out of or relating to this
First Amendment or any other Loan Documents; and venue in any such dispute
whether in federal or state court shall be laid in Harris County, Texas.
VIII. Severability. Whenever possible each provision of this First Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this First Amendment.
IX. Execution in Counterparts. This First Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts on
different dates, and each such counterpart shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
agreement.
X. Section Captions. Section captions used in this First Amendment are for
convenience of reference only, and shall not affect the construction of this
First Amendment.
XI. Successors and Assigns. This First Amendment shall be binding upon the
Borrower, the Bank and its respective successors and assigns, and shall inure to
the benefit of the Borrower, the Bank and the respective successors and assigns
of the Bank.
XII. Non-Application of Chapter 15 of Texas Credit Code. The provisions of
Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
this First Amendment or any of the other Loan Documents or to the transactions
contemplated hereby.
4
<PAGE> 5
XIII. Notice. THE LOAN AGREEMENT, AS HEREBY AMENDED, EMBODIES THE ENTIRE
AGREEMENT BETWEEN THE BORROWER AND THE BANK AND SUPERSEDES ALL PRIOR PROPOSALS,
AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER HEREOF. THE
BORROWER CERTIFIES THAT IT IS RELYING ON NO REPRESENTATION, WARRANTY, COVENANT
OR AGREEMENT EXCEPT FOR THOSE SET FORTH IN THE LOAN AGREEMENT, AS HEREBY
AMENDED, AND THE OTHER DOCUMENTS PREVIOUSLY EXECUTED IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the day and year first above written.
BORROWER:
HORIZON EXPLORATION LIMITED
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Agent and Attorney-in-Fact
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ Linda Masera
----------------------------------
Linda Masera
Vice President
5
<PAGE> 1
EXHIBIT 10.7
CREDIT AGREEMENT
$29,000,000.00
UNSECURED ADVANCING LINE OF CREDIT
FROM
BANK ONE, TEXAS, N.A.
TO
EAGLE GEOPHYSICAL, INC.
June 5, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEFINITIONS ...............................................................1
ARTICLE II. THE LOAN...................................................................8
2.01 The Advancing Line .............................................8
2.02 Advances and Payments of Principal Under the Note...............8
2.03 Prepayment and Conversion.......................................8
2.04 Interest Rate and Payments of Interest..........................9
2.05 Increased Cost of Loans........................................11
2.06 Substitute Rate................................................12
2.07 Change of Law..................................................13
2.08 Advances to Satisfy Obligations of Borrower....................13
2.09 Commitment Fee.................................................13
2.10 Facility Fee...................................................14
2.11 Supplemental Fee...............................................14
ARTICLE III. CONDITIONS...............................................................14
3.01 Receipt of Note, Agreement, and Certificate of Compliance......14
3.02 Receipt of Guaranty Agreements.................................14
3.03 Receipt of Organizational Documents............................14
3.04 Receipt of Certified Copy of Corporate Proceedings and
Certificates of Incumbency.................................14
3.05 Receipt of Certificates of Authority and Certificates of
Good Standing..............................................15
3.06 UCC Search.....................................................15
3.07 Opinion of Counsel.............................................15
3.08 Fees...........................................................15
3.09 Financial Statements...........................................15
3.10 Request for Advance............................................15
3.11 Accuracy of Representations and Warranties and No Event
of Default.................................................15
3.12 Legal Matters Satisfactory to Counsel to Bank..................15
3.13 No Material Adverse Change.....................................15
3.14 Legal Fees.....................................................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES............................................16
4.01 Existence and Good Standing....................................16
4.02 Due Authorization..............................................16
4.03 Valid and Binding Obligations..................................16
4.04 Scope and Accuracy of Financial Statements.....................16
4.05 Liabilities, Litigation and Restrictions.......................17
4.06 Margin Stock...................................................17
4.07 Authorizations and Consents....................................17
4.08 Compliance with Laws, Rules, Regulations and Orders............17
4.09 Proper Filing of Tax Returns and Payment of Taxes Due..........17
4.10 ERISA..........................................................18
4.11 Investment Company Act Compliance..............................18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.12 Public Utility Holding Company Act Compliance..................18
4.13 Environmental Laws.............................................18
4.14 Subsidiaries...................................................19
4.15 Existing Indebtedness..........................................19
4.16 Material Commitments...........................................19
4.17 Insurance......................................................19
4.18 Material Misstatements and Omissions...........................19
ARTICLE V. AFFIRMATIVE COVENANTS......................................................20
5.01 Use of Funds...................................................20
5.02 Maintenance and Access to Records..............................20
5.03 Monthly Unaudited Financial Statements of Borrower.............20
5.04 Annual Audited Financial Statements of Borrower................20
5.05 Compliance Certificate.........................................20
5.06 Statement of Material Adverse Change in Condition..............20
5.07 Additional Information.........................................20
5.08 Compliance with Laws and Payment of Assessments and Charges....21
5.09 Maintenance of Existence and Good Standing.....................21
5.10 Further Assurances.............................................21
5.11 Initial Expenses of Bank.......................................21
5.12 Subsequent Expenses of Bank....................................21
5.13 Maintenance of Tangible Property...............................22
5.14 Maintenance of Insurance.......................................22
5.15 Inspection of Tangible Assets/Right of Audit...................22
5.16 Payment of Note and Performance of Obligations.................22
5.17 ERISA Reports..................................................22
5.18 Minimum Current Ratio..........................................23
5.19 Tangible Net Worth Requirement.................................23
5.20 Cash Flow to Debt Service Ratio................................23
5.21 Maximum Funded Senior Debt and Capital Leases to
Capitalization............................................23
5.22 Interest Coverage Ratio........................................23
5.23 Compliance with Environmental Laws.............................23
5.24 Hazardous Substances Indemnification...........................24
5.25 Changes in Management..........................................24
5.26 Payment of Taxes, Etc..........................................24
5.27 Notice of Litigation...........................................24
5.28 Notices Regarding Account Debtors..............................25
5.29 Notice of Change of Principal Offices..........................25
5.30 Payment of Accounts Payable....................................25
5.31 Ship Mortgage..................................................25
ARTICLE VI. NEGATIVE COVENANTS........................................................25
6.01 Mortgages or Pledges of Assets.................................25
6.02 Negative Pledges...............................................25
6.03 Nature of Business.............................................25
6.04 Sales of Assets................................................26
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
6.05 Cancellation of Insurance......................................26
6.06 Margin Stock...................................................26
6.07 Changes in Business Structure..................................26
6.08 Transactions with Affiliates...................................26
ARTICLE VII. EVENTS OF DEFAULT........................................................26
7.01 Enumeration of Events of Default...............................26
7.02 Rights Upon Unmatured Event of Default.........................28
7.03 Rights Upon Default............................................28
ARTICLE VIII. MISCELLANEOUS...........................................................28
8.01 Security Interests in Deposits and Right of Offset or
Banker's Lien..............................................28
8.02 Survival of Representations, Warranties and Covenants..........28
8.03 Notices and Other Communications...............................28
8.04 Parties in Interest............................................29
8.05 Renewals and Extensions........................................29
8.06 No Waiver by Bank..............................................29
8.07 INDEMNIFICATION................................................30
8.08 GOVERNING LAW..................................................30
8.09 Incorporation of Exhibits......................................30
8.10 Survival Upon Unenforceability.................................30
8.11 Rights of Third Parties........................................30
8.12 Amendments or Modifications of this Agreement..................30
8.13 Agreement Construed as an Entirety.............................30
8.14 Number and Gender..............................................31
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS......................31
8.16 Controlling Provision Upon Conflict............................31
8.17 Time, Place and Method of Payments.............................31
8.18 Non-Application of Chapter 15 of Texas Credit Code.............31
8.19 Counterpart Execution..........................................31
8.20 Disclosure and Use of Confidential Information.................31
EXHIBITS
EXHIBIT A Note
EXHIBIT B Compliance Certificate
EXHIBIT C Form of Request for Advance
EXHIBIT D Matters to be covered by the opinion of counsel to Borrower
SCHEDULES
4.05 Litigation
4.14 Subsidiaries
4.15 Existing Indebtedness
4.16 Material Commitments
4.17 Certificates of Insurance
6.08 Agreements with Seitel, Inc.
</TABLE>
iii
<PAGE> 5
ADVANCING CREDIT AGREEMENT
THIS ADVANCING CREDIT AGREEMENT, is entered into as of the 5th day of
June 1998, by and among EAGLE GEOPHYSICAL, INC., a Delaware corporation (herein
referred to as the "Borrower"), and BANK ONE, TEXAS, N.A., a national banking
association (the "Bank").
W I T N E S S E T H
WHEREAS, Borrower desires to institute an advancing line of credit with
Bank for purposes of satisfying Borrower's working capital needs and for general
corporate purposes;
WHEREAS, Bank is willing to institute such an advancing line of credit
for Borrower in accordance with the terms and provisions hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and the mutual benefits to be derived herefrom, Bank and
Borrower agree as follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
"Advancing Commitment" means the obligation of Bank, subject to the
provisions of this Agreement and existing only through the last Business Day
prior to the Maturity Date, to advance to Borrower funds, not to exceed at any
one time outstanding the sum of Twenty-Nine Million Dollars ($29,000,000.00).
"Affiliate" means, as applied to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by", and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Advancing Credit Agreement, as the same may be
amended or supplemented from time to time.
"Bank" has the meaning set forth in the preamble hereof.
"Base Rate" means, at any time, the rate of interest per annum then most
recently established and published by the Bank as its Base Rate, which is eight
and one-half percent (8.50%) as of the date of this Agreement.
"Base Rate Loan" means any Loan for which interest thereon is to be
computed at the Floating Rate in accordance with this Agreement.
<PAGE> 6
"Borrower" has the meaning set forth in the preamble hereof.
"Business Day" shall mean: (a) for all purposes, a day other than a
Saturday, Sunday or legal holiday for commercial banks under the laws of the
State of Texas or the laws of the United States of America, and (b) in addition,
for purposes of any LIBOR Loan, a day that satisfies the requirements of clause
(a) and is a day on which commercial banks in London, England are open for
domestic or international business.
"Cash Flow" shall be defined for any fiscal quarter of Borrower as the
sum of net income plus depreciation and other non-cash charges less non-cash
income of Borrower and its Subsidiaries on a consolidated basis, during such
quarter.
"Closing" means the date on which this Agreement is executed and
delivered by Bank and Borrower.
"Compliance Certificate" means the certificate of the president or vice
president of Borrower required to be submitted to Bank from time to time
pursuant to this Agreement, which certificate shall be in the form attached
hereto as Exhibit "B."
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
consolidated net income, plus consolidated interest expense, plus consolidated
tax expenses, plus depreciation and amortization, plus consolidated non-cash
charges deducted from consolidated net income, to (b) consolidated interest
expense, all calculated in accordance with GAAP.
"Current Assets" and "Current Liabilities" means at any time, all assets
or liabilities, respectively, that should in accordance with GAAP, be classified
as current assets or current liabilities, respectively, on a consolidated
balance sheet of Borrower and its Subsidiaries.
"Debt Service" shall be defined for any fiscal quarter of Borrower as the
sum of (i) principal amounts required to be paid by Borrower and its
Subsidiaries during such quarter on Indebtedness other than in connection with
this Loan, plus (ii) lease payments required to be paid by Borrower and its
Subsidiaries during such quarter in connection with capital leases, plus (iii)
the outstanding principal balance due at the beginning of such quarter on the
Loans hereunder, divided by sixteen.
"Environmental Laws" means (a) the following federal laws as they may be
cited, referenced and amended from time to time: the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
environmental statutes of any state in which property of Borrower is situated,
as they may be cited, referenced and amended from time to time; (c) any rules or
regulations promulgated under or adopted pursuant to the above federal and state
laws; and (d) any other federal, state or local statute or any requirement,
rule, regulation, code, ordinance or order adopted pursuant thereto, including,
without limitation, those
2
<PAGE> 7
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling or release of Hazardous Substances.
"EFES" means Eagle Front End Services, Ltd.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with Borrower would be treated as a single employer
under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 7.01 of
this Agreement.
"Financial Statements" means the statements of the financial condition of
the indicated Person, as at the point in time and for the period indicated and
consisting of at least a consolidated balance sheet, income statement and
statement of cash flows, and, when the foregoing are audited, accompanied by the
certification of such Person's independent certified public accountants and
footnotes to any of the foregoing, all of which shall be prepared in accordance
with GAAP applied on a basis consistent with that of the preceding year.
"Floating Rate" means: (a) with respect to the principal amount
outstanding on Base Rate Loans from the date of this Agreement through July 31,
1998, the Base Rate in effect from time to time; and (b) with respect to the
principal amount outstanding on Base Rate Loans from August 1, 1998 until paid,
the Base Rate in effect from time to time, plus one-half of one percent (0.5%).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Guarantor" means each of the following parties: Eagle Geophysical
Onshore, Inc., Eagle Geophysical Offshore, Inc., Eagle Geophysical de Mexico,
Inc, Eagle Geophysical GOM, Inc., Eagle Front End Services, Ltd. and Eagle
Geophysical Management, Inc.
"Guaranty Agreement" means the duly authorized, executed and binding
written agreement of each Guarantor, in form an substance acceptable to Bank in
its discretion, whereby such Guarantor unconditionally guarantees the full
payment and performance of all Obligations of Borrower to Bank arising under
this Agreement and all of the other Loan Documents.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs),
3
<PAGE> 8
toxic substances or related materials, petroleum and petroleum products and
associated oil or natural gas exploration, production and development wastes or
any substances defined as "hazardous substances", "hazardous materials",
"hazardous wastes" or "toxic substances" under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Superfund Amendments
and Reauthorization Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other Environmental Laws now or
hereafter enacted or promulgated by any regulatory authority or governmental
body.
"High Yield Debt Offering" means that certain contemplated offering of up
to $100,000,000 of Senior Notes issued by Borrower on terms substantially as set
forth in the Summary of Indicative 144A Offering Terms dated May 5, 1998,
prepared by Prudential Securities Incorporated, and otherwise acceptable to Bank
in its discretion (it being understood that Bank has no objection to the amount
of such offering exceeding $100,000,000).
"Indebtedness" means, as to any Person, (a) all items of indebtedness or
liability (other than capital, surplus, deferred credits and reserves, as such)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet as at the date as of which
Indebtedness is to be determined, (b) indebtedness secured by any mortgage,
pledge or lien existing on or encumbering property owned by the Person whose
Indebtedness is being determined, whether or not the indebtedness secured
thereby shall have been assumed (provided that if the indicated Person is not
liable for payment of such indebtedness, the amount thereof shall be deemed not
to exceed the book value of the encumbered property), and (c) all indebtedness
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted with recourse, agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such Person has agreed
to supply or advance funds (whether by way of loan, purchase of securities or
capital contribution, through a commitment to pay for property or services
regardless of the nondelivery of such property or the nonfurnishing of such
services or otherwise), or in respect of which such Person has otherwise become
directly or indirectly liable, contingently or otherwise, whether now existing
or hereafter arising.
"Initial Public Offering" means the initial public offering described in
the Form S-1 Registration Statement initially filed by Borrower on June 2, 1997.
"Interest Rate(s)" means the Floating Rate or the LIBOR Rate, as
applicable.
"Interest Period" means as to any LIBOR Loan the period commencing on and
including the date of such Loan (or on the effective date of the election
pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending
on and including the day preceding the same day (or if there is no such same
day, the day preceding the last day) in the 1st, 2nd, or 3rd calendar month
thereafter, as selected by Borrower in accordance with Section 2.04(B), and
thereafter such period commencing on and including the day immediately following
the last day of the then ending Interest Period for such Loan and ending on and
including the day preceding the day corresponding to the first day of such
Interest Period (or if there is no such corresponding day, the day preceding
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<PAGE> 9
the last day), in the 1st, 2nd, or 3rd calendar month thereafter, as so selected
by Borrower; provided, however, that if any such Interest Period would otherwise
end on a day prior to a day that is not a Business Day it shall be extended so
as to end on the day prior to the next succeeding Business Day unless the same
would fall in a different calendar month, in which case such Interest Period
shall end on the day preceding the first Business Day preceding such next
succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other evidence
of Indebtedness or any other security (other than current trade and customer
accounts) of, or loan to, such Person.
"LIBOR" means, in respect to any Interest Period, the rate per annum
determined by the Bank to be the quotient of (a) the rate quoted, on an
immediately available funds basis, to the Bank, at approximately 10:00 a.m.
local time in Houston, Texas on the date one (1) Business Day prior to the first
day of such Interest Period, for the offering by leading banks in the London
interbank market of Dollars for deposit with the Bank for a period comparable to
such Interest Period and in an amount comparable to the amount of the Loan
determined by the Bank to be outstanding during such Interest Period and as to
which the LIBOR Rate is to be determined, divided by (b) 1.0, minus the Reserve
Percentage expressed as a decimal, for such Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest thereon
is to be computed on the basis of the LIBOR Rate.
"LIBOR Rate" means: (a) with respect to the principal amount outstanding
on LIBOR Loans from the date of this Agreement through July 31, 1998, a rate per
annum equal to the sum of LIBOR for the Interest Period for which interest is to
be determined at the LIBOR Rate, plus two percent (2.0%); and (b) with respect
to the principal amount outstanding on LIBOR Loans from August 1, 1998 until
paid, a rate per annum equal to the sum of LIBOR for the Interest Period for
which interest is to be determined at the LIBOR Rate, plus two and one-half
percent (2.5%).
"Limitation Period" means any period while any amount remains owing on
the Note and interest on such amount calculated at the Floating Rate, plus any
fees payable hereunder and deemed to be interest under applicable law, would
exceed the Maximum Rate.
"Loan" means, singly, any advance by Bank to Borrower pursuant to this
Agreement and "Loans" means, cumulatively, the aggregate sum of all money
advanced by Bank to Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement and all promissory notes, security
agreements, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"Maturity Date" means October 5, 1998.
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<PAGE> 10
"Maximum Rate" means the maximum non-usurious interest rate permissible
under applicable laws of the State of Texas or those of the United States of
America applicable to Bank.
"Multi-employer Plan" means a plan described in Section 4001(a)(3) of
ERISA which covers employees of Borrower or any ERISA Affiliate.
"Note" means that certain promissory note in the original face amount of
$29,000,000.00, dated of even date herewith, made by Borrower payable to the
order of Bank, in the form attached hereto as Exhibit "A," together with all
deferrals, renewals, extensions, amendments, modifications or rearrangements
thereof, which promissory note shall evidence the advances to Borrower by Bank
pursuant to Section 2.01 hereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to Bank, now existing or hereafter arising, including, but not limited
to, the indebtedness evidenced by the Note, whether direct, indirect, related,
unrelated, fixed, contingent, specified, unspecified, joint, several, or joint
and several, and all interest and fees accruing thereon and all attorneys' fees
and other expenses incurred in the enforcement or collection thereof.
"Borrower" has the meaning set forth in the preamble hereof.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business that are not yet due and payable;
(B) Claims or liens for taxes, assessments, or similar charges, that are
due and remain unpaid, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long as
levy and execution thereon have been stayed and continue to be stayed,
and in Bank's sole judgment they do not, in the aggregate, materially
detract from the value of the property of Borrower or any Subsidiary, or
materially impair the use thereof in the operation of its business;
(C) Liens against equipment or fixtures of Borrower to secure the price
payable by Borrower for the purchase of, or improvements or accessions
to, such equipment or fixtures, respectively; and
(D) Liens in favor of Bank.
"Person" means an individual, company, corporation, partnership, limited
partnership, joint venture, trust, association, unincorporated organization or a
government or any agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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<PAGE> 11
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from
time to time.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Request for Advance" means the written request by Borrower for an
advance by Bank pursuant to this Agreement, which Request for Advance shall be
in a form, and shall include the information and accompanying supporting
documentation, as prescribed in Exhibit "C" attached hereto.
"Required Number" means: in the case of notices hereunder (i) relative to
borrowings, prepayments, elections of the LIBOR Rate, selections of Interest
Periods for, or other transactions in respect of, LIBOR Loans: two (2) Business
Days; or (ii) relative to all transactions in respect of Base Rate Loans: one
(1) Business Day; it being understood, however, that in the case of notices
involving transactions in respect of more than one type of Loan (such as a
change in type of Loan in accordance with Section 2.04(B)), "Required Number"
means that number of days, as indicated above in respect of the Loans involved,
which would constitute the longest applicable period of time.
"Reserve Percentage" means for any Interest Period, the average (for such
Interest Period) maximum rate at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D of the Federal Reserve Board by member banks
of the Federal Reserve System as it applies to the Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Percentage shall reflect any other reserves
required to be maintained by member banks by reason of any regulatory change
against (i) any category of liabilities that includes deposits by reference to
which the interest rate for LIBOR Loans is to be determined as provided in this
Agreement or (ii) any category of extensions of credit or other assets that
include LIBOR Loans. As of the date of this Agreement the Reserve Percentage is
zero.
"Senior Debt" means all Indebtedness of Borrower and its Subsidiaries, on
a consolidated basis, including the Indebtedness of Borrower to Bank arising
hereunder, excluding any Indebtedness that has been subordinated to Borrower's
Indebtedness to Bank on terms and conditions acceptable to Bank, in its sole
discretion.
"Subsidiary" means (a) any corporation in which Borrower, directly or
indirectly through its Subsidiaries, owns more than fifty percent (50%) of the
stock of any class or classes having by the terms thereof the ordinary voting
power to elect a majority of the directors of such corporation; and (b) any
partnership, association, joint venture, or other entity in which Borrower,
directly or indirectly through its Subsidiaries, has more than a fifty percent
(50%) equity interest at the time.
"Tangible Net Worth" means the total assets of Borrower and its
Subsidiaries on a consolidated basis, exclusive of (a) those assets classified
as intangible, including, without limitation, goodwill, patents, trademarks,
trade names, copyrights, franchises and deferred charges, (b) treasury stock and
minority interests in any Person, (c) cash set apart and held in a sinking or
other analogous
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<PAGE> 12
fund established for the purpose of redemption or other retirement of capital
stock, (d) to the extent not already deducted from total assets, allowances for
depreciation, depletion, obsolescence and/or amortization of properties,
uncollectible accounts, and contingent but probable liabilities as to which an
amount can be established, (e) deferred taxes and (f) all assets arising from
advances to officers, former officers or sales representatives of Borrower and
its Subsidiaries on a consolidated basis made outside of the ordinary course of
business; less total liabilities of Borrower and its Subsidiaries on a
consolidated basis; all of the above being determined in accordance with GAAP.
"Unmatured Event of Default" means any event or occurrence which solely
with the lapse of time or the giving of notice or both will ripen into an Event
of Default.
Undefined financial accounting terms used in this Agreement shall be
defined in accordance with GAAP.
ARTICLE II. THE LOAN
2.01 The Advancing Line. Upon the terms and conditions (including,
without limitation, the right of Bank to terminate the Advancing Commitment
hereunder upon an Event of Default or an Unmatured Event of Default) and relying
on the representations and warranties contained in this Agreement, Bank agrees,
for a period from and after the date hereof through the last Business Day prior
to the Maturity Date, to make advances for the account of Borrower from time to
time following receipt of a Request for Advance; provided, however, that the
aggregate principal amount of all such advances shall not exceed the amount of
the Advancing Commitment.
Through the last Business Day prior to the Maturity Date, Borrower may
use this advancing credit by borrowing up to the amount of the Advancing
Commitment in accordance with the terms and conditions of this Agreement, but
Borrower shall not be permitted to reborrow any portion of the Advancing
Commitment once it has been borrowed and prepaid. The borrowings made by
Borrower pursuant to the Advancing Commitment shall be made at the principal
office of Bank and shall be evidenced by the Note. The entire outstanding
principal amount of the Note is due on the Maturity Date.
2.02 Advances and Payments of Principal Under the Note. Each time an
advance is made against or payment is made on the Note, Bank is hereby
irrevocably authorized by Borrower to make appropriate entries of such in its
records in accordance with the usual and customary practices of accounting for
advances and payments on notes; provided, however, the failure of Bank to do so
shall not relieve Borrower of its correct liability hereunder or under the Note.
The aggregate unpaid amount of advances reflected by the notations by
Bank on its records or the ledger sheets affixed to the Note shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced to Borrower and outstanding under
this Agreement and interest on such amounts calculated in accordance with this
Agreement. Interest provided for in the Note and herein shall be calculated on
unpaid sums actually
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<PAGE> 13
advanced and outstanding under the Note pursuant to the terms of this Agreement
and only for the period from the date or dates of such advances until repayment.
2.03 Prepayment and Conversion. Upon the Required Number of days notice
to the Bank, Borrower may: (a) without the payment of penalty or premium, prepay
the principal of the Loans, or (b) voluntarily convert the applicable Interest
Rate of any Loan prior to the termination of the applicable Interest Period in
whole or in part, from time to time; any partial payment or conversion to be
made in the sum of not less than $500,000 or any $100,000 increment in addition
thereto; provided that with respect to any such prepayment or conversion of any
Loan upon which interest is being calculated at the LIBOR Rate Borrower shall
reimburse the Bank on demand for any costs, including administrative costs,
incurred by the Bank as a result of such prepayment or conversion and any loss
incurred or to be incurred by the Bank in the redeployment of the funds released
by any such prepayment. Such loss shall be the difference, as reasonably
determined by Bank, between (i) Bank's gross return hereunder with respect to
that portion of the Loans which is prepaid, based on the applicable Interest
Rate for such portion of the Loans and (ii) any lesser amount realized by Bank
in deploying the funds received in repayment, or otherwise realized from that
portion of the Loans so prepaid, during the period from the date of the
prepayment until the end of the Interest Period for that portion of the Loans
prepaid; provided that Bank shall use its best efforts to redeploy such funds in
a commercially reasonable manner.
2.04 Interest Rate and Payments of Interest.
(A) Interest on Base Rate Loans shall be calculated on the basis of a
year of 365 or 366 days, as appropriate. Interest on LIBOR Loans shall be
calculated on the basis of a 360-day year, counting the actual number of
days elapsed. Interest on the outstanding principal balance of the Loans
shall accrue for each day at either the Floating Rate for such day or the
LIBOR Rate for the Interest Period which includes such day, all as
elected and specified (including specification as to length of Interest
Period, as permitted by the definition of that term, with respect to any
election of the LIBOR Rate) by Borrower in accordance with Section
2.04(B); provided that:
(i) In the absence of an election by Borrower of the LIBOR Rate,
or, having made such election but upon the Required Number of days
prior to the end of the then current Interest Period Borrower
fails or is not entitled under the terms of this Agreement to
elect to continue such Interest Rate and specify the applicable
Interest Period therefor, then upon the expiration of such then
current Interest Period, interest on the Loans shall accrue for
each day at the Floating Rate for such day, until Borrower,
pursuant to Section 2.04(B), elects a different Interest Rate and
specifies the Interest Period for the Loans.
(ii) Interest accruing on any LIBOR Loan during any Interest
Period shall be payable on the last Business Day of such then
current Interest Period; provided, however, that all accrued
interest on any LIBOR Loan converted
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<PAGE> 14
or prepaid pursuant to Section 2.03 shall be paid immediately upon
such prepayment or conversion.
(B) By at least the Required Number of days prior to the advance of any
Loan hereunder, Borrower shall select the initial Interest Rate to be
charged on such Loan, and from time to time thereafter Borrower may
elect, on at least the Required Number of days' irrevocable prior written
(or telephoned, promptly confirmed by written) notice to the Bank, to
change the Interest Rate on any Loan to any other Interest Rate
(including, when applicable, the selection of the Interest Period);
provided that; (i) Borrower shall not select an Interest Period that
extends beyond the Maturity Date; (ii) except as otherwise provided in
Section 2.03 no such change from the LIBOR Rate to another Interest Rate
shall become effective on a day other than the day, which must be a
Business Day, next following the last day of the Interest Period last
effective for such LIBOR Loan; (iii) any elections made by Borrower
pursuant to this Section 2.04(B) shall be in the amount of $100,000, plus
any additional increment of $100,000; (iv) notwithstanding anything
herein to the contrary, Borrower may not make any election under this
Section 2.04(B) that would result in Loans outstanding at more than three
(3) different LIBOR Rates without the written agreement of the Bank to do
so; and (v) the first day of each Interest Period as to a LIBOR Loan
shall be a Business Day.
(C) Interest on Base Rate Loans shall be paid monthly in arrears on the
first Business Day of each calendar month commencing with any month
during which interest begins to accrue at the Floating Rate, as elected
by Borrower pursuant to Section 2.04(B), and on the date the principal of
such Loans shall be due (at stated maturity, on acceleration, or
otherwise).
(D) Interest on past-due principal shall accrue at the greater of the
applicable Floating Rate plus three percent (3.00%) or LIBOR plus five
percent (5.00%) until such principal is paid in full, and shall be
payable upon demand by the Bank.
(E) The Bank shall notify Borrower of the current Base Rate and of the
current LIBOR Rate from time to time upon request by Borrower.
(F) It is the intention of the parties hereto to conform strictly to
applicable usury laws as in effect from time to time. Accordingly, if any
transactions contemplated hereby would be usurious under applicable Law
(including the laws of the United States of America, or of any other
jurisdiction whose laws may be mandatorily applicable), then, in that
event, notwithstanding anything to the contrary in this Agreement, or any
other agreement entered into in connection with this Agreement, it is
agreed the aggregate of all consideration that constitutes interest under
applicable law that is contracted for, charged, or received under this
Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement shall under no circumstances exceed the
Maximum Rate, and any excess shall be credited to Borrower by Bank (or,
if such consideration shall have been paid in full,
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<PAGE> 15
such excess refunded to Borrower by Bank). All sums paid, or agreed to be
paid, to the Bank for use, forbearance, and detention of the indebtedness
of Borrower by the Bank shall, to the extent permitted by applicable
laws, be amortized, pro rated, allocated, and spread throughout the full
term of such indebtedness until such indebtedness is paid in full so that
the actual rate of interest is uniform, but does not exceed the Maximum
Rate, throughout the full term thereof. If at any time the applicable
Interest Rate, which shall be deemed for purposes of this Section
2.04(F), only, to include any other fees, charges, or other forms of
consideration which constitute interest under applicable law that is
contracted for, charged, or received under this Agreement or any other
agreement entered into in connection with this Agreement, exceeds the
Maximum Rate, the rate of interest to accrue pursuant to this Agreement
shall be limited, notwithstanding anything to the contrary in this
Agreement, to the Maximum Rate, but any subsequent reductions in the
Interest Rate otherwise provided for herein shall not reduce the interest
to accrue pursuant to this Agreement below the Maximum Rate until the
total amount of interest accrued pursuant to this Agreement equals the
amount of interest that would have accrued if a varying rate per annum
equal to the otherwise applicable Interest Rate had at all times been in
effect. If the total amount of interest paid or accrued pursuant to this
Agreement under the foregoing provisions is less than the total amount of
interest that would have accrued if a varying rate per annum equal to the
otherwise applicable Interest Rate had at all times been in effect, then
Borrower agrees to pay upon final maturity of the Loans an amount equal
to the difference between (a) the lesser of (i) the amount of interest
that would have accrued if the Maximum Rate had at all times been in
effect or (ii) the amount of interest that would have accrued if a
varying rate per annum equal to the otherwise applicable Interest Rate
had at all times been in effect, and (b) the amount of interest accrued
in accordance with the other provisions of this Agreement.
2.05 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a result of any
regulatory change
(i) the basis of taxation of payments to Bank of the principal of,
or interest on, any LIBOR Loan or any other amounts due under this
Agreement in respect of any such LIBOR Loan (except for taxes
imposed on the overall net income or receipts of Bank, and
franchise or other taxes imposed generally on Bank), by the
jurisdiction (or any political subdivision therein) in which Bank
has its principal office is changed;
(ii) any reserve, special deposit, or similar requirement
(including without limitation any reserve requirement under
regulations of the Board of Governors of the Federal Reserve
System) against assets of, deposits with, or for the account of,
or credit extended by Bank, is imposed, increased, modified, or
deemed applicable; or
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(iii) any other condition affecting this Agreement or any LIBOR
Loan is imposed on Bank or (in the case of LIBOR Loans) the London
interbank market;
and the result of any of the foregoing is to increase the actual direct
cost to Bank of making or maintaining any such LIBOR Loan or to reduce
the amount of any sum received by Bank hereunder in respect thereof (and
such increase or reduction shall not have been compensated by a
corresponding increase in the interest rate applicable to the respective
Loans), by an amount deemed by Bank to be material (such increases in
cost and reductions in amounts receivable being herein called "Increased
Costs"), then Borrower shall pay to Bank, within thirty (30) days after
its demand, such additional amount or amounts as will compensate Bank for
those Increased Costs. The Bank will not demand to be compensated by
Borrower for such Increased Costs unless the Bank generally makes such
demands to its other LIBOR Loan customers who are similarly situated. A
certificate of Bank setting forth the basis for the determination of such
amount necessary to compensate the Bank as aforesaid, accompanied by
documentation showing reasonable support for such increased costs or
reduced sums received by Bank, shall be delivered to Borrower and shall
be conclusive, save for manifest error, as to such determination and such
amount.
(B) Notwithstanding the foregoing provisions of this Section 2.05, in the
event that by reason of any regulatory change the Bank either (i) incurs
Increased Costs based on, or measured by, the excess above a specified
level of the amount of a category of deposits or other liabilities of
Bank that includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank that includes LIBOR
Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if Bank so
elects by notice to Borrower, the obligation of Bank to make or convert
Loans of any other type into LIBOR Loans hereunder shall be suspended
until the earlier of the date such regulatory change ceases to be in
effect or the date Borrower and Bank agree upon an alternative method of
determining the interest rate payable by Borrower on LIBOR Loans, and all
LIBOR Loans of Bank then outstanding shall either be repaid or be
converted into a Base Rate Loan (if not otherwise prohibited under the
terms of this Agreement) at Borrower's option.
(C) Bank agrees that upon the occurrence of any regulatory change giving
rise to the operation of the first paragraph of this Section 2.05, it
will, if requested by Borrower and to the extent permitted by law or by
the relevant government authority, for a period of thirty (30) days
endeavor in good faith to avoid or minimize the increase in cost or
reduction in amount receivable resulting from such regulatory change;
provided, however, that such change can be made in such a manner that
Bank, in its sole determination, suffers no economic, legal, regulatory,
or other disadvantage. Any expense incurred by Bank in so doing shall be
paid by Borrower on delivery to Borrower of a certificate as to the
amount of such expense, which
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certificate shall be conclusive in the absence of manifest error. Nothing
in this paragraph shall affect or postpone the obligations of Borrower
set forth in any other paragraph of this Section 2.05.
2.06 Substitute Rate. Anything herein to the contrary notwithstanding,
if within two (2) Business Days prior to the first day of any Interest Period
for a LIBOR Loan the Bank is not, for any reason whatsoever, quoted rates for
the offering of Dollars for deposit with it in the London interbank market for a
period and amount relevant to the computation of the rate of interest on LIBOR
Loans for such Interest Period, the Bank shall give Borrower prompt notice
thereof and, if Borrower elects to obtain a Loan for the amount previously
requested as a LIBOR Loan, then on what would otherwise have been the first day
of such Interest Period such Loans shall be made as Base Rate Loans (if not
otherwise prohibited under the terms of this Agreement), in accordance with the
election procedures set forth in Section 2.04(B); provided, however, that prior
to the effective date of such election, interest shall be calculated at the
Floating Rate.
2.07 Change of Law. Notwithstanding any other provision herein, in the
event that any change in any applicable law, rule or regulation or in the
interpretation or administration thereof shall make it unlawful for the Bank to
(i) honor any commitment it may have hereunder to make any LIBOR Loan, then such
commitment shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR
Loans of the Bank then outstanding shall be repaid or, if Borrower so elects,
converted to Base Rate Loans (if not otherwise prohibited under the terms of
this Agreement) in accordance with the election procedures set forth in Section
2.04(B); provided, however, that prior to the effective date of such election,
interest shall be calculated at the Floating Rate. Any remaining commitment of
Bank hereunder to make LIBOR Loans (but not other Loans) shall terminate
forthwith. Upon the occurrence of any such change, the Bank shall promptly
notify Borrower thereof, and shall furnish to Borrower in writing evidence
thereof certified by the Bank.
Any repayment or conversion of any LIBOR Loan which is required under
this Section 2.07 or under 2.05(B) shall be effected by payment thereof,
together with accrued interest thereon, on demand, and concurrently there shall
occur the borrowing of the corresponding Base Rate Loan as provided herein.
If any repayment to Bank of any LIBOR Loan (including conversions
thereof) is made under this Section 2.07 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, Borrower shall
pay to Bank upon its request such amount or amounts as will compensate it for
the amount by which the rate of interest on such Loan immediately prior to such
repayment exceeds the stated rate of interest on relending or reinvesting the
funds received in connection with such prepayment, in each case for the period
from the date of such prepayment to the Business Day next succeeding the last
day of such then current Interest Period, all as determined by Bank in its good
faith discretion.
2.08 Advances to Satisfy Obligations of Borrower. Bank may, but shall
not be obligated to, make advances hereunder and apply same to the satisfaction
of any condition, warranty, representation or covenant of Borrower contained in
this Agreement and/or the Guaranty and the funds so advanced and applied shall
be part of the Loan proceeds advanced under this Agreement
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<PAGE> 18
and evidenced by the Note. Bank shall endeavor to give written notice to
Borrower at least five (5) Business Days prior to making any such advance
pursuant to this Section, provided that Bank shall not be obligated to give any
such notice if, in good faith, it has determined that a delay in making any such
advance would have a material adverse effect on the business, operations or
financial condition of Borrower.
2.09 Commitment Fee. As consideration for the commitment of Bank to make
Loans to Borrower through the Maturity Date pursuant to this Agreement, Borrower
agrees to pay to Bank within three (3) Business Days of receipt of Bank's
statement as to the quarterly periods ending June 30 and September 30 (except
the first period shall be for a period of time from the Closing to September 30,
1998) during the period commencing on the date of this Agreement to and
including the Maturity Date, and at the Maturity Date, a fee equal to one half
of one percent (0.5%) per annum (computed on the basis of 365 or 366 days, as
the case may be) multiplied by an amount equal to the daily average excess, if
any, of: (a) the Advancing Commitment hereunder, over (b) the aggregate
principal amount outstanding on the Note throughout the period from the date of
this Agreement or previous calculation date provided above, whichever is later,
to the relevant calculation date or the Maturity Date, as the case may be.
2.10 Facility Fee. As consideration for the commitment of Bank to make
Loans to Borrower pursuant to this Agreement, Borrower shall pay to Bank a fee
("Facility Fee") equal to Twenty-Five Thousand Dollars ($25,000.00), $10,000.00
of which has been paid and the balance of which shall be paid at Closing.
2.11 Supplemental Fee. If Borrower has not consummated the High Yield
Debt Offering by September 4, 1998, then within thirty (30) days thereafter
Borrower shall pay to Bank an additional fee equal to the greater of: (a) One
Hundred Thousand Dollars ($100,000.00), or (b) one percent (1%) of all advances
made from Bank to Borrower under the terms of this Agreement..
ARTICLE III. CONDITIONS
The obligation of Bank to make advances of the Loans referred to in
Article II of this Agreement is subject to the prior or contemporaneous
satisfaction of the following conditions precedent stated in this Article III.
3.01 Receipt of Note, Agreement, and Certificate of Compliance. Bank
shall have received the Note, multiple counterparts of this Agreement, as
requested by Bank, and the Certificate of Compliance, all duly executed by an
authorized officer of Borrower.
3.02 Receipt of Guaranty Agreements. Bank shall have received the
Guaranty Agreement of each Guarantor, each duly executed by an authorized
officer of such Guarantor.
3.03 Receipt of Organizational Documents. Bank shall have received from
Borrower, from each Guarantor other than EFES, and from the general partner of
EFES the Articles of Incorporation and bylaws of such Person, certified as being
true and correct by the secretary or an assistant secretary of such Person, and
shall have received from EFES its Certificate of Limited
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<PAGE> 19
Partnership and its Agreement of Limited Partnership, certified as being true
and correct by the secretary or an assistant secretary of the general partner of
EFES.
3.04 Receipt of Certified Copy of Corporate Proceedings and Certificates
of Incumbency. Bank shall have received from Borrower, from each Guarantor
other than EFES, and from the general partner of EFES on behalf of EFES, copies
of all resolutions of its board of directors authorizing, with respect to
Borrower, the transactions set forth in this Agreement, and the execution of
this Agreement, the Note, and the Security Instruments, and with respect to each
Guarantor, the transaction set forth in its Guaranty Agreement and its execution
of such Guaranty Agreement, such copy or copies to be certified by the secretary
or an assistant secretary as being true and correct and in full force and effect
as of the date hereof. In addition, Bank shall have received from Borrower, from
each Guarantor other than EFES, and from the general partner of EFES, a
certificate of incumbency signed by the secretary or an assistant secretary of
such Person setting forth (a) the names of the officers executing those of the
Loan Documents to which it is a party, (b) the office(s) to which such Persons
have been elected and in which they presently serve and (c) an original specimen
signature of each such Person.
3.05 Receipt of Certificates of Authority and Certificates of Good
Standing. Bank shall have received certificates, as of the most recent dates
practicable, of the Secretary of State of the jurisdiction in which Borrower,
each Guarantor, and the general partner of EFES is formed attesting to the
existence of such Person, and of each state (or of a comparable governmental
authority in any applicable foreign jurisdiction) in which such Person is
qualified to do business as a foreign corporation attesting to such
qualification, and from the department of revenue or taxation of each of the
foregoing states or governmental authorities, as to the good standing of such
Person.
3.06 UCC Search. The results of a Uniform Commercial Code/security
interest search showing all financing statements and other documents or
instruments on file against Borrower in the Offices of the Secretaries of State
of the States of Texas and Delaware, such searches to be as of a date no more
than ten (10) days prior to the date of the Closing.
3.07 Opinion of Counsel. Bank shall have received an opinion of counsel
to Borrower in the form attached hereto as Exhibit "D".
3.08 Fees. Bank shall have contemporaneously received the fees required
by Section 2.10.
3.09 Financial Statements. Bank shall have received the Financial
Statements of Borrower as of March 31, 1998, showing financial information
consistent with that previously provided to Bank.
3.10 Request for Advance. Bank shall have received from Borrower a
Request for Advance.
3.11 Accuracy of Representations and Warranties and No Event of Default.
The representations and warranties contained in Article IV of this Agreement
shall be true and correct
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in all material respects on the date of the making of such Loans or advances
with the same effect as though such representations and warranties had been made
on such date; and no Event of Default shall have occurred and be continuing or
will have occurred at the completion of the making of such Loans or advances.
3.12 Legal Matters Satisfactory to Counsel to Bank. All legal matters
incident to the consummation of the transactions hereby contemplated shall be
satisfactory to counsel for Bank.
3.13 No Material Adverse Change. No material adverse change shall have
occurred since the date of this Agreement in the condition, financial or
otherwise, of Borrower.
3.14 Legal Fees. All legal fees and disbursements owed to Bank's special
counsel who provided representation to the Bank in connection with this
Agreement or any amendment hereto shall have been paid.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make the Loan
hereunder, Borrower represents and warrants to Bank (which representations and
warranties will survive the delivery of the Note) that:
4.01 Existence and Good Standing. Borrower and each of its Subsidiaries
is a corporation, duly organized, legally existing and in good standing under
the laws of its jurisdiction of incorporation and is duly qualified and in good
standing as a foreign corporation in all jurisdictions wherein the property
owned or the business transacted by it makes such qualification necessary, other
than those jurisdictions wherein the failure to so qualify does not have a
material adverse effect on Borrower.
4.02 Due Authorization. The execution and delivery by Borrower of this
Agreement and the borrowings hereunder; the execution and delivery by Borrower
of the Note and the Security Instruments; and the repayment by Borrower of
Indebtedness evidenced by the Note and interest and fees provided in the Note
and this Agreement (a) are within the corporate power of Borrower; (b) have been
duly authorized by all necessary corporate action; and (c) do not and will not
(i) require the consent of any regulatory authority, governmental body, or any
other Person, (ii) violate any provision of law, the certificate of
incorporation, the articles of incorporation, or the bylaws of Borrower, (iii)
cause a default to occur under the terms and provisions of any indenture,
instrument or other agreement to which Borrower is a party or by which its
property may be presently bound or encumbered, or (iv) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest, charge
or other encumbrance in, upon or of any of the properties or assets of Borrower
under any such indenture, instrument or other agreement, other than under any of
the Security Instruments.
4.03 Valid and Binding Obligations. This Agreement, the Note, and the
Security Instruments are the legal, valid and binding obligations of and
enforceable against Borrower in
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accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other laws of general application affecting creditors' rights and
judicial decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to Bank hereunder are and will be
complete and correct in all material respects; are and will be prepared in
accordance with GAAP and practices consistently applied; and do and will fairly
reflect the financial condition and the results of the operations of Borrower
and its Subsidiaries in all material respects as of the dates and for the period
stated therein (subject only to normal year-end audit adjustments with respect
to such unaudited interim statements); and no material adverse change has since
occurred in the condition, financial or otherwise, of Borrower or its
Subsidiaries (taken as a whole).
4.05 Liabilities, Litigation and Restrictions. Except as disclosed in
the Financial Statements, neither Borrower nor any of its Subsidiaries has any
liabilities, direct or contingent, which may materially and adversely affect its
business or assets. Except as described on Schedule 4.05, there is no litigation
or other action of any nature pending before any court, governmental
instrumentality, regulatory authority or arbitral body or, to the knowledge of
Borrower, threatened against or affecting Borrower, or any of its Subsidiaries,
which might reasonably be expected to result in any material, adverse change in
the business or assets of Borrower or its Subsidiaries (taken as a whole). No
unusual or unduly burdensome restriction, restraint or hazard exists by
contract, law, governmental regulation or otherwise relative to the business or
material properties of Borrower or any of its Subsidiaries which might
reasonably be expected to result in any material, adverse change in the business
or assets of Borrower or its Subsidiaries (taken as a whole) other than such as
relate generally to Persons engaged in the business activities conducted by
Borrower or any applicable Subsidiary.
4.06 Margin Stock. None of the proceeds of the Loans will be used for
the purpose of buying or carrying margin stock.
4.07 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any governmental or
public authority or any third party is required to authorize, or is otherwise
required in connection with the valid execution and delivery by Borrower of this
Agreement, the Note, and the Security Instruments or any instrument contemplated
hereby, the repayment by Borrower of advances against the Note and interest and
fees provided in the Note and this Agreement, or the performance by Borrower of
its obligations under any of the foregoing.
4.08 Compliance with Laws, Rules, Regulations and Orders. To the best of
the knowledge and belief of Borrower, neither the business nor any of the
activities of Borrower or any of its Subsidiaries, as presently conducted,
violates any law or any rule, regulation or directive of any applicable
judicial, administrative or other governmental instrumentality (including, but
not by way of limitation, any law or any rule, regulation or directive of any
judicial, administrative or other governmental instrumentality relating to
zoning, to any Environmental Law, or to the stabilization of wages or prices the
result of which violation would have a material adverse effect on Borrower
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or its Subsidiaries (taken as a whole), and Borrower and each of its
Subsidiaries possess all licenses, approvals, registrations, permits and other
authorizations necessary to enable it to carry on its respective business in all
material respects as now conducted, and all such licenses, approvals,
registrations, permits and other authorizations are in full force and effect;
and Borrower has no reason to believe that it will be unable to obtain the
renewal of any such licenses, approvals, registrations, permits and other
authorizations.
4.09 Proper Filing of Tax Returns and Payment of Taxes Due. Borrower and
each of its Subsidiaries have duly and properly filed all United States Income
Tax returns and all other tax returns which are required to be filed, and has
paid all taxes due pursuant to said returns or pursuant to any assessment
received, except such taxes, if any, as are being contested in good faith and as
to which adequate provisions and disclosures have been made; and the respective
charges and reserves on the books of Borrower and each of its Subsidiaries with
respect to any taxes or other governmental charges are adequate.
4.10 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any plan; no notice
of intent to terminate a plan has been filed, nor has any plan been terminated;
no circumstances exist which constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administrate a plan, nor has the PBGC instituted any such proceedings;
neither Borrower nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multi-employer plan; Borrower and
each ERISA Affiliate have met their minimum funding requirements under ERISA
with respect to all of their plans and the present value of all vested benefits
under each plan exceeds the fair market value of all plan assets allocable to
such benefits, as determined on the most recent valuation date of the plan and
in accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of Borrower or any ERISA Affiliate to the
PBGC or the plan under Title IV of ERISA; and neither Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
4.11 Investment Company Act Compliance. Borrower is not, nor is it
directly or indirectly controlled by or acting on behalf of any person or entity
which is, an investment company or an "affiliated person" of an investment
company within the meaning of the Investment Company Act of 1940.
4.12 Public Utility Holding Company Act Compliance. Borrower is not a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.13 Environmental Laws. To the best of the knowledge and belief of
Borrower:
(a) no property of Borrower or any of its Subsidiaries is currently on,
or has ever been on, any federal or state list of superfund sites as
listed on the Environmental Protection
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Agency National Priority List or any comparable state registries or list
in any state of the United States (collectively "Superfund Sites");
(b) no Hazardous Substances have in the past been generated,
transported, and or disposed of, by Borrower or any of its Subsidiaries
at any Superfund Site;
(c) except in accordance with a valid permit, license, certificate
or approval of the relevant regulatory authority or governmental body,
there has been no emission, spill, release, disposal or discharge of any
Hazardous Substance into or upon (i) the air, (ii) soils or any
improvements located thereon, (iii) surface water or groundwater, or (iv)
the sewer, septic system or waste treatment, storage or disposal system
servicing any property of Borrower or any of its Subsidiaries; and
(d) no complaint, order, directive, claim, citation, notice of
environmental report, notice of investigation or other notice by any
regulatory authority or governmental body or any other Person with
respect to (i) air emissions, (ii) spills, releases or discharges to
soils or any improvements located thereon, surface water, groundwater or
the sewer, septic system or waste treatment, storage or disposal systems
servicing any property of Borrower or any of its Subsidiaries, (iii)
solid or liquid waste disposal, (iv) the use, generation, storage,
transportation or disposal of any Hazardous Substance, or (v) other
environmental, health or safety matters affecting any property of
Borrower or any of its Subsidiaries, any improvements located thereon, or
the business thereon conducted, has been received by Borrower or any of
its Subsidiaries, nor has Borrower been given oral or written notice
thereof;
provided, however, that the representations and warranties set forth in
subparagraphs (c) and (d) above shall apply only to events and conditions which
either resulted in (i) a continuing lien or encumbrance on the property of
Borrower or (ii) otherwise materially affect Borrower's use or operation of its
property or Borrower's ability to repay the Indebtedness evidenced by the Note.
4.14 Subsidiaries. Borrower has no Subsidiaries other than those
listed on Schedule 4.14 hereto, and the jurisdiction of incorporation and
principal place of business of each of Borrower's Subsidiaries is set forth on
Schedule 4.14.
4.15 Existing Indebtedness. All Indebtedness of Borrower and any
Subsidiary existing as of the Closing, other than accounts payable incurred in
the ordinary course of business that are not more than 30 days overdue, is
described in Schedule 4.15; and neither Borrower nor any Subsidiary is in
default with respect to any of such Indebtedness, except as described on
Schedule 4.15.
4.16 Material Commitments. Except as described in Schedule 4.16
hereto, (A) neither Borrower nor any Subsidiary has any material leases,
contracts or commitments of any kind (including, without limitation, employment
agreements; collective bargaining agreements; powers of attorney; distribution
arrangements; patent license agreements; contracts for future purchase or
delivery of goods or rendering of services; bonuses, pension and retirement
plans; or accrued
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vacation pay, insurance and welfare agreements) requiring aggregate expenditure
by Borrower in excess of $500,000 per year; (B) to the best of Borrower's
knowledge, all parties to all such material leases, contracts, and other
commitments to which Borrower or any Subsidiary is a party have materially
complied with the provisions of such leases, contracts, and other commitments;
and (C) to the best of Borrower's knowledge, no party is in material default
under any thereof and no event has occurred that but for the giving of notice or
the passage of time, or both, would constitute a material default.
4.17 Insurance. Borrower maintains insurance with respect to the
properties and business of Borrower providing coverage for such liabilities,
casualties, risks and contingencies and in such amounts as it believes is
customary in the industry. As of the date hereof, the insurance coverage
reflected on the Certificate(s) of Insurance attached hereto as Schedule 4.17 is
in full force and effect, and, except as disclosed on Schedule 4.17, all
premiums due thereon have been paid.
4.18 Material Misstatements and Omissions. No express representation or
warranty by or with respect to Borrower or any Subsidiary contained herein or in
any certificate or other document required by this Agreement and furnished by
Borrower or any Subsidiary contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower covenants, so long as any Indebtedness of Borrower to Bank
remains unpaid under this Agreement or Bank remains obligated to make advances
hereunder, to:
5.01 Use of Funds. Use the proceeds advanced under the Loan to finance
Borrower's working capital needs and for other general corporate purposes, and
furnish Bank such evidence as it may reasonably require with respect to such
use.
5.02 Maintenance and Access to Records. Keep adequate records in
accordance with good accounting practices, of all of Borrower's transactions so
that at any time, and from time to time, its true and complete financial
condition may be readily determined and, at Bank's reasonable request, make all
financial records available for Bank's inspection and permit Bank to make and
take away copies thereof.
5.03 Monthly Unaudited Financial Statements of Borrower. Deliver to
Bank, on or before the sixtieth (60th) day after the end of each calendar month,
unaudited consolidated and consolidating Financial Statements of Borrower and
its Subsidiaries as at the end of such month and from the beginning of each
fiscal year to the end of each such month, which Financial Statements shall be
certified by the president or chief financial officer of Borrower as being true
and correct, subject to changes resulting from year-end audit adjustments.
5.04 Annual Audited Financial Statements of Borrower. Deliver to Bank,
on or before the one hundred and twentieth (120th) day after the close of each
fiscal year of Borrower: (a) the annual audited consolidated Financial
Statements of Borrower and its Subsidiaries, and
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(b) unaudited consolidating Financial Statements of Borrower and its
Subsidiaries, certified by the president or chief financial officer of Borrower
as being true and correct.
5.05 Compliance Certificate. Deliver to Bank a Compliance Certificate:
(a) at the time of Borrower's execution of this Agreement, and (b) on the first
day of each month thereafter prior to the Maturity Date.
5.06 Statement of Material Adverse Change in Condition. Deliver to Bank,
promptly upon any officer of Borrower having knowledge of any material adverse
change in the condition, financial or otherwise, of Borrower or its Subsidiaries
(or any event or circumstance that would result in any such material adverse
change in condition including, but not limited to, litigation and changes in
business), a statement of the president or vice president of Borrower, setting
forth the change in condition or event or circumstance likely to result in any
such change and the steps being taken by Borrower or the applicable Subsidiary
with respect to such change in condition or event or circumstance.
5.07 Additional Information. Furnish to Bank all information, if any,
filed with the SEC by Borrower and all information routinely provided by
Borrower to its shareholders, generally. Furnish to the Bank, promptly upon the
Bank's reasonable request, such additional financial or other information
concerning the assets, liabilities, operations, and transactions of Borrower.
5.08 Compliance with Laws and Payment of Assessments and Charges. Comply
with all applicable statutes and government regulations, including, without
limitation, ERISA, and pay all taxes, assessments, governmental charges, claims
for labor, supplies, rent, and other obligations which, if unpaid, might become
a lien against its property, except any of the foregoing being contested in good
faith and as to which satisfactory accruals have been provided, unless failure
to comply or pay would not have a material adverse effect on the business,
operations or financial condition of Borrower.
5.09 Maintenance of Existence and Good Standing. Maintain Borrower's and
its Subsidiaries' corporate existence and good standing in the jurisdiction of
its incorporation, and in all jurisdictions wherein the property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
other than those jurisdictions wherein the failure to so qualify will not have a
material adverse effect on Borrower, or on any of Borrower's Subsidiaries
considered on a consolidated basis with Borrower.
5.10 Further Assurances. Promptly cure any defects in the execution and
delivery of this Agreement, the Note, the Security Instruments, or any other
instrument referred to herein or executed in connection with the Note, and upon
notice, immediately execute and deliver to Bank, all such other and further
instruments as may be reasonably required or desired by Bank from time to time
in compliance with the covenants and agreements made in this Agreement.
5.11 Initial Expenses of Bank. Pay all fees and expenses of Porter &
Hedges, L.L.P., special legal counsel for Bank, incurred in connection with the
negotiation and preparation
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of this Agreement, the Note, the Security Instruments, or any other instrument
referred to herein or executed in connection with the Note, the satisfaction of
the conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.12 Subsequent Expenses of Bank. Upon request, promptly reimburse Bank
for all reasonable amounts expended, advanced or incurred by Bank to collect the
Note or to enforce the rights of Bank under this Agreement, the Note, the
Security Instruments, or any other instrument referred to herein or executed in
connection with the Note, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to Borrower by Bank and which amounts
will include, but not be limited to, (a) all court costs, (b) attorneys' fees,
(c) fees of auditors and accountants, (d) investigation expenses, (e) internal
fees of Bank's in-house legal counsel, (f) fees and expenses incurred in
connection with Bank's participation as a member of the creditors' committee in
a case commenced under Title 11 of the United States Code or other similar law
of the United States, the State of Texas or any other jurisdiction, (g) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
ss.ss.362 Title 11 of the United States Code, and (h) fees and expenses incurred
in connection with any action pursuant to ss.ss.1129 Title 11 of the United
States Code, incurred by Bank in connection with the collection of any sums due
under this Agreement, together with interest at the Floating Rate per annum,
calculated on a basis of a year of three hundred sixty-five (365) or three
hundred sixty-six (366) days, on each such amount from the date of notification
to Borrower that the same was expended, advanced or incurred by Bank until the
date it is repaid to Bank, with the obligations under this Section 5.13,
surviving the non-assumption of this Agreement in a case commenced under Title
11 of the United States Code or other similar law of the United States, the
State of Texas or any other jurisdiction and being binding upon Borrower or a
trustee, receiver or liquidator of any such party appointed in any such case.
5.13 Maintenance of Tangible Property. Maintain all of Borrower's and
its Subsidiaries' tangible property that is material to the conduct of
Borrower's or any of its Subsidiaries' businesses in good repair and condition
and make all necessary replacements thereof and operate such property in a good
and workmanlike manner in accordance with standard industry practices.
5.14 Maintenance of Insurance. Continue to maintain, or cause to be
maintained, insurance with respect to the properties and business of Borrower
and its Subsidiaries against such liabilities, casualties, risks and
contingencies and in such amounts as is customary in the industry, in an amount
and form, and underwritten by an insurer or insurers, as are reasonably
acceptable to Bank, and furnish to Bank, at the execution of this Agreement and
annually thereafter, certificates evidencing such insurance.
5.15 Inspection of Tangible Assets/Right of Audit. Permit (or cause to
be permitted) any authorized representative of Bank, to visit and inspect (at
the risk of Bank and/or such representative) any tangible asset of Borrower and
its Subsidiaries, and/or to audit the books and records of Borrower or any of
its Subsidiaries, during normal business hours. Bank shall give Borrower five
(5) Business Days prior written notice of any such inspection or audit, and no
such inspection or audit shall occur more often than once per calendar quarter;
provided, however, that if Bank has a good faith belief that a condition exists
that constitutes an Event Default or an Unmatured Event of Default, which may
reasonably be expected to have a material adverse effect
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on the business, operations, or financial condition of Borrower, the Bank shall
be entitled to conduct any such visit and inspection, and/or any such audit,
notwithstanding that a prior visit and inspection, or audit, respectively, was
conducted in the same calendar quarter, and without the necessity of giving five
(5) Business Days prior written notice.
5.16 Payment of Note and Performance of Obligations. Pay the Note
according to the reading, tenor and effect thereof, and do and perform every act
and discharge all of the obligations provided to be performed and discharged
hereunder.
5.17 ERISA Reports. Promptly after the filing or receiving thereof,
copies of all reports, including annual reports, and notices which Borrower or
any of its Subsidiaries files with or receives from the PBGC or the U.S.
Department of Labor under ERISA; and promptly after Borrower knows or has reason
to know that any Reportable Event or Prohibited Transaction has occurred with
respect to any plan or that the PBGC, Borrower, or any of Borrower's
Subsidiaries has instituted or will institute proceedings under Title IV of
ERISA to terminate any plan, Borrower will deliver to Bank a certificate of the
chief financial officer of Borrower setting forth details as to such Reportable
Event or Prohibited Transaction or plan termination and the action Borrower or
its applicable Subsidiary proposes to take with respect thereto.
5.18 Minimum Current Ratio. Maintain a ratio of Current Assets to
Current Liabilities, excluding current maturities of long-term debt, of not less
than 1.15 to 1.0.
5.19 Tangible Net Worth Requirement. Maintain a total Tangible Net Worth
of not less than the greater of: (a) $45,000,000.00, or (b) ninety-five percent
(95%) of the equity raised by Borrower as the result of the Initial Public
Offering; increasing by seventy percent (70%) of net income (excluding losses)
of Borrower and its Subsidiaries on a consolidated basis subsequent to September
30, 1997.
5.20 Cash Flow to Debt Service Ratio. Maintain a ratio of Cash Flow to
Debt Service for each fiscal quarter of not less than 1.25 to 1.0.
5.21 Maximum Funded Senior Debt and Capital Leases to Capitalization.
Maintain a ratio between: (a) the sum of the outstanding balance at any time,
and from time to time, of Senior Debt plus the remaining obligatory payments on
all capital leases of Borrower and its Subsidiaries on a consolidated basis, and
(b) the sum of the outstanding balance at any time, and from time to time, of
Senior Debt, plus the remaining obligatory payments under capital leases of
Borrower and its Subsidiaries on a consolidated basis, plus the Tangible Net
Worth, of not greater than the following: .45 to 1.00 at June 30, 1998; and .70
to 1.0 at closing of the High Yield Debt Offering and at September 30, 1998;
provided, however, that Bank shall have the right to adjust the ratios set forth
in this Section if Borrower fails to consummate the High Yield Debt Offering by
September 4, 1998, or if Borrower raises additional equity, in which event the
adjusted ratios shall be determined by Bank, in its discretion, based on its
then-prevailing credit policies and parameters, as applied to similarly situated
Borrowers.
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5.22 Interest Coverage Ratio. Maintain a Consolidated Fixed Charge
Coverage Ratio for the preceding four full fiscal quarters for which quarterly
Financial Statements are available, calculated on a pro forma basis as if such
Indebtedness had been incurred and the proceeds applied at the beginning of such
four fiscal quarters, of not less than 2.7 to 1.0.
5.23 Compliance with Environmental Laws. Comply in all material respects
with any and all requirements of law, including, without limitation,
Environmental Laws, (a) related to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or affected by
any property of Borrower or its Subsidiaries, or (b) required for the
performance or conduct of its operations, including, without limitation, all
permits, licenses, registrations, approvals and authorizations, and, in this
regard, comply fully and in a timely manner with, and cause all employees, crew
members, agents, contractors, subcontractors and future lessees (pursuant to
appropriate lease provisions) of Borrower and its Subsidiaries while such
Persons are acting within the scope of their relationship with Borrower or its
Subsidiaries, to so comply with, all requirements of law, including, without
limitation, Environmental Laws, and other requirements with respect to the
property of Borrower and its Subsidiaries and the operation thereof necessary or
appropriate to enable Borrower to fulfill its obligations under all requirements
of law, including, without limitation, Environmental Laws, applicable to the
use, generation, handling, storage, treatment, transport and disposal of any
Hazardous Substances now or hereafter located or present on or under any such
property.
5.24 Hazardous Substances Indemnification. Indemnify and hold Bank
harmless from and against any and all claims, losses, damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings and orders,
judgments, remedial actions, requirements and enforcement actions of any kind,
and all costs and expenses incurred in connection therewith (including, without
limitation, attorneys' fees and expenses), arising directly or indirectly, in
whole or in part, out of (a) the presence of any Hazardous Substances on, under
or from the property of Borrower or its Subsidiaries, whether prior to or during
the term hereof, or (b) any activity carried on or undertaken on or off such
property, whether prior to or during the term hereof, and whether by Borrower or
its Subsidiaries or any predecessor in title or any employees, agents,
contractors or subcontractors of Borrower or its Subsidiaries or any predecessor
in title, or any third Persons at any time occupying or present on such
property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous Substances
at any time located or present on or under such property; with the foregoing
indemnity further applying to any residual contamination on or under the
property of Borrower or its Subsidiaries, or any property of any other Person,
or affecting any natural resources, and to any contamination of any property or
natural resources arising in connection with the generation, use, handling,
storage, transportation or disposal of any Hazardous Substances, irrespective of
whether any of such activities were or will be undertaken in accordance with
applicable requirements of law, including, without limitation, Environmental
Laws, and surviving satisfaction of all Indebtedness of Borrower to Bank and the
termination of this Agreement, provided, further, that the claims and other
actions of any kind against Bank which give rise to such indemnity are not
barred by the applicable statute of limitations at the time such claims or
actions are instituted and such indemnity shall not extend to any act or
omission by Bank or any Affiliate of Bank or any of Bank's employees or agents
with respect to the relevant property subsequent to Bank becoming the owner of,
taking possession of to the exclusion
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of Borrower or assuming operations of any property previously owned by Borrower
and with respect to which property such claim, loss, damage, liability, fine,
penalty, charge, proceeding, order, judgment, action or requirement arises
subsequent to the acquisition of title thereto, taking possession thereof or
assumption of operations thereon by Bank or any Affiliate of Bank or any of
Bank's employees or agents. Notwithstanding anything herein to the contrary, the
provisions of this Section 5.23 shall survive any termination of this Agreement
and shall survive the payment and performance in full of all Obligations owed by
Borrower to Bank.
5.25 Changes in Management. Notify Bank of any change in the senior
management of Borrower, as such management exists as of the date hereof.
5.26 Payment of Taxes, Etc. Borrower and its Subsidiaries will each pay
or cause to be paid when due, all taxes, assessments, and charges or levies
imposed upon it or on any of its property or which it is required to withhold
and pay, except where contested in good faith by appropriate proceedings with
adequate reserves therefor having been set aside on its books, provided,
however, that Borrower and its Subsidiaries shall each pay or cause to be paid
all such taxes, assessments, charges, or levies forthwith whenever foreclosure
on any lien that may have attached (or security therefor) appears imminent.
5.27 Notice of Litigation. Borrower and its Subsidiaries will each give
notice to the Bank within ten (10) Business Days of the occurrence of: (A) any
litigation or proceeding in which it is a party if an adverse decision therein
might reasonably be expected to require it to pay more than $250,000.00 or
deliver (or lose title to) assets the value of which exceeds such sum (whether
or not the claim is considered to be covered by insurance); and (B) the
institution of any other suit or proceeding involving Borrower that would
reasonably be expected to materially and adversely affect its operations,
financial condition, property, or business prospects.
5.28 Notices Regarding Account Debtors. Upon the receipt by Borrower of
any notice of the death of an Account Debtor or a partner thereof, or of the
dissolution, termination of existence, insolvency, business failure, appointment
of a receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, an Account
Debtor, Borrower will immediately give the Bank written advice thereof.
5.29 Notice of Change of Principal Offices. Borrower will notify the
Bank at least ten (10) Business Days in advance of any change in the location of
the principal office of Borrower or any of its Subsidiaries.
5.30 Payment of Accounts Payable. Pay its accounts payable not later
than thirty (30) days after their due date, except such as are being contested
in good faith and as to which adequate provision or accrual has been made,
provided that up to an aggregate amount of $500,000 of accounts payable not
being so contested may be overdue by more than such number of days.
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<PAGE> 30
5.31 Ship Mortgage. If Borrower has not consummated the High Yield Debt
Offering by September 4, 1998, then promptly thereafter, and in no event later
than September 18, 1998, Borrower shall grant to Bank, or shall cause an
Affiliate of Borrower to grant to Bank, a duly executed and enforceable first
preferred ship mortgage covering the Panamanian flag vessel AUSTRAL HORIZON,
Official Number 15397-86-C, securing all the Obligations of Borrower to Bank
arising under this Agreement, in form and substance satisfactory to Bank, in its
discretion.
ARTICLE VI. NEGATIVE COVENANTS
Without the prior written consent of Bank and so long as any part of the
principal or interest on the Note shall remain unpaid or Bank remains obligated
to make advances hereunder, Borrower and its Subsidiaries will not:
6.01 Mortgages or Pledges of Assets. Create, incur, assume or permit to
exist, any mortgage, pledge, security interest, lien or encumbrance on any of
its properties or assets (now owned or hereafter acquired), except that the
foregoing restrictions shall not apply to any matters that would constitute or
result in Permitted Encumbrances.
6.02 Negative Pledges. Enter into a covenant with any third party in
which Borrower or any such Subsidiary agrees not to create, incur, assume or
permit to exist, any mortgage, pledge, security interest, lien or encumbrance on
any of its properties or assets (now owned or hereafter acquired).
6.03 Nature of Business. Permit any material change to be made in the
character of its business as conducted as of the date hereof, or permit any
Subsidiary to permit any material change to be made in the character of such
Subsidiary's business as conducted as of the date hereof.
6.04 Sales of Assets. Sell, lease, assign, transfer or otherwise dispose
of, in one or any series of related transactions, all or any part of its assets,
if such transfer is material to Borrower's operations, nor enter into any
arrangement, directly or indirectly, with any Person to sell and rent or lease
back such assets or any part thereof which are intended to be used for
substantially the same purpose or purposes as the assets sold or transferred.
6.05 Cancellation of Insurance. Allow any insurance policy required to
be carried hereunder to be terminated or lapse or expire without provision for
adequate renewal thereof.
6.06 Margin Stock. Neither Borrower nor any Subsidiary will directly or
indirectly apply any part of the proceeds of the Loans to the purchasing or
carrying of any "margin stock" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, or any regulations, interpretations
or rulings thereunder.
6.07 Changes in Business Structure. Consolidate or merge with, or
purchase (for cash or securities) all or substantially all of the assets or all
or any part of the capital stock of any corporation, firm, association or
enterprise, or allow any such entity to be merged into Borrower or any of its
Subsidiaries, nor shall Borrower or any of its Subsidiaries dissolve or
liquidate.
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6.08 Transactions with Affiliates. Enter into any transaction between or
among Borrower and/or any Subsidiaries with any Affiliate on terms that are less
favorable than could be obtained in an arms-length transaction with a Person
that is not an Affiliate, provided, however, than Borrower may perform its
obligations under the existing agreements with Seitel, Inc. listed on Schedule
6.08 hereto.
ARTICLE VII. EVENTS OF DEFAULT
7.01 Enumeration of Events of Default . Any of the following events shall
be considered an Event of Default as that term is used herein:
(a) Default shall be made by Borrower in the payment of any
installment of principal on the Note,
(b) Default shall be made by Borrower in the payment of any
installment of interest on the Note, or any fees or other monetary
obligation payable hereunder, and such default shall remain unremedied in
excess of three (3) Business Days after notice being given by Bank,
(c) Default shall be made by Borrower in the due observance or
performance of any affirmative covenant required in this Agreement, the
Note, or any Security Instrument, and such default shall remain
unremedied for in excess of thirty (30) days after the earlier of: (i)
such default becoming known to Borrower, or (ii) notice being given by
Bank.
(d) Default shall be made by Borrower in the due observance or
performance of any negative covenant required in this Agreement, the
Note, or any Security Instruments. (e) Any representation or warranty
herein made by Borrower proves to have been untrue in any material
respect, or any representation, statement (including Financial
Statements), certificate or data furnished or made by Borrower to Bank in
connection herewith proves to have been untrue in any material respect as
of the date the facts therein set forth were stated or certified;
(f) Default shall be made by Borrower (as principal or guarantor
or other surety) in payment or performance of any bond, debenture, note
or other evidence of Indebtedness for borrowed money, or any other credit
agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing
in excess of $1,000,000.00 in the aggregate; and such default shall
remain unremedied for in excess of the period of grace, if any, with
respect thereto, with the effect of accelerating the maturity of any such
Indebtedness;
(g) Borrower applies for or consents to the appointment of a
receiver, trustee or liquidator of it or all or a substantial part of its
assets, or (ii) files a voluntary petition commencing a case under Title
11 of the United States Code, seeking liquidation, reorganization or
rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief or other similar law of the United States, the State of Texas or
any other jurisdiction, or
27
<PAGE> 32
(iii) makes a general assignment for the benefit of creditors, or (iv) is
unable, or admits in writing its inability to pay its debts generally as
they become due, or (v) files an answer admitting the material
allegations of a petition filed against it in any case commenced under
Title 11 of the United States Code or any reorganization, insolvency,
conservatorship or similar proceeding under any bankruptcy, insolvency,
debtor's relief or other similar law of the United States, the State of
Texas or any other jurisdiction;
(h) An order, judgment or decree shall be entered against Borrower
by any court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting relief
under Title 11 of the United States Code or under any bankruptcy,
insolvency, debtor's relief or other similar law of the United States,
the State of Texas or any other jurisdiction, approving a petition
seeking reorganization or an arrangement of its debts or appointing a
receiver, trustee, conservator, custodian or liquidator of it or all or
any substantial part of its assets, and the failure to have such order,
judgment or decree dismissed within ten (10) days of its entry;
(i) Borrower has concealed, removed, or permitted to be concealed
or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them; or has made or suffered a transfer
of any of its property which are or would be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or has made any
transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or has
suffered or permitted, while insolvent, any creditor to obtain a lien
upon any of its property through legal proceedings or distraint which is
not vacated within thirty (30) days from the date thereof;
(j) An "Event of Default," as defined in either the Credit
Agreement dated October 21, 1997, among Borrower, certain of its
Subsidiaries and Bank or the Foreign Affiliate Loan Agreement, as defined
therein, has occurred and is continuing.
7.02 Rights Upon Unmatured Event of Default. At any time that there
exists an Unmatured Event of Default, any obligation of the Bank hereunder to
make advances to or for the benefit of Borrower shall be suspended unless and
until the Bank shall reinstate the same in writing, the Unmatured Event of
Default shall have been waived by the Bank or the relevant Unmatured Event of
Default shall have been remedied prior to ripening into an Event of Default.
7.03 Rights Upon Default. Upon the happening of an Event of Default
specified in Subsections 7.01 (g) or (h), the entire aggregate principal amount
of all Indebtedness then outstanding hereunder and the interest accrued thereon
shall automatically become immediately due and payable, and upon the happening
and continuation of any other Event of Default, Bank may declare the entire
aggregate principal amount of all Indebtedness then outstanding hereunder and
the interest accrued thereon immediately due and payable. In either case, the
entire principal and interest shall thereupon become immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate maturity or notice of acceleration of maturity) and without
presentment, demand, protest, notice of protest or other notice of default or
dishonor of any kind, except as provided to the contrary elsewhere herein, all
of which are hereby expressly waived by Borrower.
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<PAGE> 33
Upon the happening and continuation of any Event of Default, all
obligations (if any) of Bank hereunder shall immediately cease and terminate
unless and until Bank shall reinstate the same in writing.
ARTICLE VIII. MISCELLANEOUS
8.01 Security Interests in Deposits and Right of Offset or Banker's Lien.
Borrower hereby transfers, assigns and pledges to Bank and/or grants to Bank a
security interest (as security for the payment and/or performance of the
obligations of Borrower under this Agreement and the Note, with such interest of
Bank to be retransferred, reassigned and/or released by Bank at the expense of
Borrower upon payment in full and/or complete performance by Borrower of all
such obligations) and the right, exercisable at such time as any obligation
hereunder shall mature, whether by acceleration of maturity or otherwise of
offset or banker's lien against all funds or other property of Borrower now or
hereafter or from time to time on deposit with or in the possession of Bank,
including, without limitation, all certificates of deposit and other depository
accounts.
8.02 Survival of Representations, Warranties and Covenants. All
representations and warranties of Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Note, or any renewal or extension of this Agreement or the
Note, or Bank remains obligated to make advances hereunder.
8.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, telex, telegram or
hand):
(a) If to Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Energy Lending
Fax: (713) 751-3544
(b) Notices and/or reports sent to Bank pursuant to Sections 5.03, 5.04,
and 5.05 shall also be sent to:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Monitoring Unit
Telephone: (713) 751-4627
Fax: (713) 751-6239
29
<PAGE> 34
(c) If to Borrower:
EAGLE GEOPHYSICAL, INC.
50 Briar Hollow Lane, 6th Floor West
Houston, Texas 77027
Attention: Richard W. McNairy
Fax: (713) 881-2801
Any party may, by proper written notice hereunder to the other, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
8.04 Parties in Interest. All covenants and agreements herein contained
by or on behalf of Borrower shall be binding upon Borrower and its successors
and assigns and inure to the benefit of Bank and its successors and assigns.
8.05 Renewals and Extensions. All provisions of this Agreement relating
to the Note shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Note.
8.06 No Waiver by Bank. No course of dealing on the part of Bank, its
officers or employees, nor any failure or delay by Bank with respect to
exercising any of its rights, powers or privileges under this Agreement, the
Note, the Security Instruments or any other instrument referred to herein or
executed in connection with the Note shall operate as a waiver thereof. The
rights and remedies of Bank under this Agreement, the Note, the Security
Instruments or any other instrument referred to herein or executed in connection
with the Note shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy. In the event that Borrower is unable to satisfy any covenant, warranty
or condition herein, no advance of loan proceeds by Bank shall have the effect
of precluding Bank from thereafter declaring any such continuing inability to be
an Event of Default as hereinabove provided.
8.07 INDEMNIFICATION. BORROWER HEREBY RELEASES AND AGREES TO INDEMNIFY
AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND ATTORNEYS
(COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL CLAIMS,
DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND UNACCRUED,
INCLUDING ANY OF THE FOREGOING ALLEGED TO HAVE RESULTED FROM NEGLIGENCE OF ANY
OF THE BANK PARTIES, UNLESS ATTRIBUTABLE TO BANK PARTIES' OWN GROSS NEGLIGENCE
OR WILFUL MISCONDUCT, THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST ANY OF BANK
PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION OR
PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR ARISING OUT OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
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<PAGE> 35
8.08 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
8.09 Incorporation of Exhibits. The Exhibits and Schedules attached to
this Agreement are incorporated herein for all purposes and shall be considered
a part of this Agreement.
8.10 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in this Agreement, the Note, the Security Instruments or in
any other instrument referred to herein or executed in connection with the Note
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof or of any other instrument referred to herein or executed
in connection herewith.
8.11 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of Bank and Borrower and no other Person shall
have standing to require satisfaction of such provisions in accordance with
their terms or be entitled to assume that Bank will refuse to make advances in
the absence of strict compliance with any or all thereof and any or all of such
provisions may be freely waived in whole or in part by Bank at any time if in
its sole discretion it deems it advisable to do so.
8.12 Amendments or Modifications of this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
8.13 Agreement Construed as an Entirety. This Agreement, for convenience
only, has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties and other legal relations of the parties
hereto shall be determined from this Agreement as an entirety and without regard
to the aforesaid division into Articles and Sections and without regard to
headings prefixed to said Articles or Sections.
8.14 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative.
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT, TOGETHER
WITH THE NOTE AND THE SECURITY INSTRUMENTS, CONSTRUED TOGETHER WITH THE
ADVANCING CREDIT AGREEMENT AND ALL INSTRUMENTS EXECUTED PURSUANT THERETO,
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO,
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<PAGE> 36
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.16 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of the Note, the Security
Instruments or any other instrument referred to herein or executed in connection
with the Note, the provisions of this Agreement shall control.
8.17 Time, Place and Method of Payments. All payments required pursuant
to this Agreement or the Note shall be made in immediately available funds;
shall be deemed received by Bank on the next Business Day following receipt if
such receipt is after 3:00 p.m., on any Business Day, and shall be made at the
principal banking quarters of Bank.
8.18 Non-Application of Chapter 15 of Texas Credit Code. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Security Instruments or to the transactions
contemplated hereby.
8.19 Counterpart Execution. This Agreement may be executed as one
instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
8.20 Disclosure and Use of Confidential Information. Bank agrees to keep
confidential all information disclosed to it by Borrower in connection with this
Agreement or the Loans or otherwise made available to Bank pursuant to the terms
hereof, with the exception of information that is either publicly available or
obtained by Bank from third parties not known by the Bank to be subject to any
confidentiality agreement with Borrower (collectively, excluding such
exceptions, the "Confidential Information") and Bank shall not, without
Borrower's prior written consent, disclose to any third party, firm, corporation
or entity (other than regulatory agencies having jurisdiction over Bank) such
Confidential Information, except: (a) as required by law and (b) to third-party
consultants of Bank, including, but not limited to, attorneys and accountants,
on a "need to know" basis in connection with the negotiation, execution, or
administration of this Agreement or any of the Loan Documents, or the
enforcement of any Borrower's Obligations or any of Bank's rights thereunder,
provided that such third-party consultants' possession and/or use of such
Confidential Information shall be subject to the provisions of this Section.
Bank shall use such Confidential Information only for the purposes of its
evaluation, administration, and enforcement of the Agreement, the Loan
Documents, and the Loans.
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<PAGE> 37
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
BORROWER:
EAGLE GEOPHYSICAL, INC.
By: /s/ Richard W. McNairy
----------------------------------
Richard W. McNairy
Vice President and Chief
Financial Officer
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ Linda Masera
----------------------------------
Linda Masera
Vice President
33
<PAGE> 1
EXHIBIT 10.8
ADVANCING NOTE
$29,000,000.00 Houston, Texas June 5, 1998
On the dates hereinafter prescribed, for value received, EAGLE
GEOPHYSICAL, INC., a Delaware corporation, (herein called "Borrower"), having an
address at 50 Briar Hollow Lane, 6th Floor West, Houston, Texas 77027, promises
to pay to the order of BANK ONE, TEXAS, N.A. (herein called "Bank"), at its
principal offices at 910 Travis, Houston, Harris County, Texas 77002, (i) the
principal amount of TWENTY-NINE MILLION AND NO/100 DOLLARS ($29,000,000.00) or
the principal amount advanced pursuant to the terms of the Loan Agreement of
even date herewith between Borrower and Bank (the "Loan Agreement") as of the
date of maturity of this Note, whether by acceleration or otherwise, whichever
may be the lesser, and (ii) interest on the principal balance from time to time
advanced and remaining unpaid from the date of the advance until maturity at a
rate of interest equal to lesser of (a) the "Interest Rate" (as defined in the
Loan Agreement), or (b) the Maximum Rate (as hereinafter defined). Any increase
or decrease in interest rate resulting from a change in the Maximum Rate shall
be effective immediately when such change becomes effective, without notice to
Borrower, unless Applicable Law (as defined below) requires that such increase
or decrease not be effective until a later time, in which event such increase or
decrease shall be effective at the earliest time permitted under the provisions
of such law.
Notwithstanding the foregoing, if during any period the Interest
Rate exceeds the Maximum Rate, the rate of interest in effect on this Note shall
be limited to the Maximum Rate during each such period, but at all times
thereafter the rate of interest in effect on this Note shall be the Maximum Rate
until the total amount of interest accrued on this Note equals the total amount
of interest which would have accrued hereon if the Floating Rate had at all
times been in effect.
All payments on this Note shall be applied first to accrued interest
and the balance, if any, to principal.
This Note is an advancing credit note and it is contemplated that by
reason of prepayments hereon there may be times when no indebtedness is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder subsequent
to each such occurrence. Each principal advance and each payment hereof made
pursuant to this Note shall be reflected by Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid, accrued interest remaining outstanding on
this Note.
"Maximum Rate" means the Maximum Rate of non-usurious interest
permitted from day to day by applicable law, including as to Article 5069-1.04,
Vernon's Texas Revised Civil Statutes Annotated (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated weekly rate ceiling."
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws
--------------
INITIAL FOR
IDENTIFICATION
<PAGE> 2
of the State of Texas and laws of the United States of America. It is intended
that Article 1.04, Title 79, Revised Civil Statutes of Texas, 1927, as amended
(Article 5069-1.04, as amended, Vernon's Texas Civil Statutes) shall be included
in the laws of the State of Texas in determining Applicable Law; and for the
purpose of applying said Article 1.04 to this Note, the interest ceiling
applicable to this Note under said Article 1.04 shall be the indicated weekly
rate ceiling from time to time in effect. Borrower and Bank hereby agree that
Chapter 15 of Subtitle 3, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, shall not apply to this Note or the loan transaction evidenced by, and
referenced in, the Loan Agreement in any manner, including without limitation,
to any account or arrangement evidenced or created by, or provided for in, this
Note.
"Business Day" shall mean any day on which banks are open for
general banking business in the State of Texas, other than a Saturday, a Sunday,
a legal holiday or any other day on which banks in the State of Texas are
required or authorized by law or executive order to close.
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before the Maturity Date, as prescribed in the Loan Agreement defined below;
interest to accrue upon the principal sum from time to time owing and unpaid
hereunder shall be due and payable in monthly installments, as it accrues, with
the first such monthly installment of interest hereon being due and payable on
the first day of July 1998, and with such subsequent installments of interest
being due and payable on the first day of each succeeding month thereafter;
provided, however, the final installment of interest hereunder shall be due and
payable not later than the maturity of the principal sum hereof, howsoever such
maturity may be brought about.
When the first (1st) day of a calendar month falls upon a Saturday,
Sunday or legal holiday, the payment of interest and principal, if any, due upon
such date shall be due and payable upon the next succeeding Business Day.
In no event shall the aggregate of the interest on this Note, plus
any other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
Bank and Borrower specifically intend and agree to limit contractually the
interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay interest at a rate in excess of the Maximum Rate, and neither Borrower
nor any other party liable herefor shall ever be liable for interest in excess
of that determined at the Maximum Rate, and the provisions of this paragraph
shall control over all provisions of this Note or of any other instruments
pertaining to or securing this Note. If any amount of interest taken or received
by Bank shall be in excess of the maximum amount of interest which, under
Applicable Law, could lawfully have been collected on this Note, then the excess
shall be deemed to have been the result of a mathematical error by the parties
hereto and shall be refunded promptly to Borrower. All amounts paid or agreed to
be paid in connection with the indebtedness evidenced by this Note which would
under Applicable Law be deemed "Interest" shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread throughout the full
term of this Note.
___________
INITIAL FOR
IDENTIFICATION
2
<PAGE> 3
This Advancing Note is the Note issued pursuant to the Loan
Agreement. Reference is hereby made to the Loan Agreement for a statement of the
rights and obligations of the holder of this Note and the duties and obligations
of Borrower in relation thereto; but neither this reference to the Loan
Agreement nor any provisions thereof shall affect or impair the absolute and
unconditional obligation of Borrower to pay any outstanding and unpaid principal
of and interest on this Note when due, in accordance with the terms of the Loan
Agreement. Each advance and each payment made pursuant to this Note shall be
reflected by notations made by Bank on its records and the aggregate unpaid
amounts reflected by the notations on the records of Bank shall be deemed
rebuttably presumptive evidence of the principal amount owing under this Note.
In the event of default in the payment when due of any of the
principal of or any interest on this Note, or in the event of default under the
terms of the Loan Agreement or any of the Loan Documents, or if any event occurs
or condition exists which authorizes the acceleration of the maturity of this
Note under any agreement made by Borrower, Bank (or other holder of this Note)
may, at its option, without presentment or demand or any notice to Borrower or
any other person liable herefor, declare the unpaid principal balance of and
accrued interest on this Note to be immediately due and payable.
If this Note is collected by suit or through the Probate or
Bankruptcy Court, or any judicial proceeding, or if this Note is not paid at
maturity, however such maturity may be brought about, and is placed in the hands
of an attorney for collection, then Borrower agrees to pay reasonable attorneys'
fees, not to exceed 10% of the full amount of principal and interest owing
hereon at the time this Note is placed in the hands of an attorney.
Borrower and all sureties, endorsers and guarantors of this Note
waive demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for Bank, in order to enforce payment of this Note by them, to first institute
suit or exhaust its remedies against any Borrower or others liable herefor, or
to enforce its rights against any security herefor, and consent to any one or
more extensions or postponements of time of payment of this Note on any terms or
any other indulgences with respect hereto, without notice thereof to any of
them. Bank may transfer this Note, and the rights and privileges of Bank under
this Note shall inure to the benefit of Bank's representatives, successors or
assigns.
Executed this 5th day of June 1998.
EAGLE GEOPHYSICAL, INC.
By: /s/ Richard W. McNairy
--------------------------------
Richard W. McNairy
Vice President
3
<PAGE> 1
EXHIBIT 10.9
GUARANTY
THIS GUARANTY ("Guaranty"), is made and entered into as of June 5, 1998
by __________________________________, a Delaware corporation, (the "Guarantor")
and BANK ONE, TEXAS, N.A., a national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, Bank and EAGLE GEOPHYSICAL, INC., a Delaware corporation
("Borrower") have entered into that certain Advancing Credit Agreement of even
date herewith providing for loans to Borrower of up to $29,000,000.00, as may be
amended from time to time (the "Loan Agreement"), specifically including the
indebtedness evidenced by that certain promissory note of even date, executed by
Borrower and payable to BANK, in the face amount of $29,000,000.00 and all other
notes given in substitution therefor or in modification, increase, renewal or
extension thereof in whole or in part (collectively, the "Loan");
WHEREAS, as a condition to Bank's entry into said Loan Agreement and
its advance of funds to Borrower thereunder, Guarantor has agreed to enter into
this Guaranty; and
WHEREAS, Guarantor will directly and indirectly benefit from the Loan,
as defined in the Loan Agreement and evidenced and governed thereby.
NOW, THEREFORE, for and in consideration of the premises and the
extension of credit by Bank to Borrower pursuant to the Loan Agreement, and for
TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and to induce Bank to
execute the Loan Agreement, Bank and Guarantor hereby agree as follows:
1. Guarantor unconditionally guarantees the prompt payment to Bank of
the following (the "Guaranteed Indebtedness"):
Any and all indebtedness, obligations and liabilities of Borrower to Bank
now existing or hereafter incurred in connection with or incident to the
Loan, under or arising out of or in connection with any documents
executed in connection with any indebtedness of Borrower to Bank in
connection with the Loan or any promissory note or notes executed by
Borrower at any time in connection with the Loan, whether for principal,
interest, penalty interest, fees, expenses or otherwise, including,
without limitation, all sums, principal, accrued interest and other
amounts
<PAGE> 2
owing with respect to the following described promissory note executed
by Borrower payable to the order of Bank, together with any and all
modifications, increases, renewals or extensions thereof, whether with
or without notice to Guarantor, specifically including the following
described note:
<TABLE>
<CAPTION>
Original Final
Date Amount Maturity Date
------------ -------------- ---------------
<S> <C> <C>
June 5, 1998 $29,000,000.00 October 5, 1998
</TABLE>
2. If the Guaranteed Indebtedness is not paid by Guarantor when due, as
required herein, and this Guaranty is placed in the hands of an attorney for
collection, or if this Guaranty is enforced by suit or through the Bankruptcy
Court or through any judicial proceedings, Guarantor shall pay to Bank an amount
equal to its reasonable attorneys' fees and collection costs incurred by Bank in
the collection of the Guaranteed Indebtedness.
3. This is an absolute, complete and continuing Guaranty, and no notice
of the Guaranteed Indebtedness or any extension of credit already or hereafter
contracted by or extended to Borrower need be given to Guarantor, nor shall
anything herein contained be a limitation upon the amount of credit which may be
extended to Borrower, the numbers of transactions with Borrower, repayments by
Borrower to Bank, or the allocation by Bank of repayment by Borrower, it being
the understanding of the Guarantor that Guarantor's liability shall continue
hereunder so long as any of the Guaranteed Indebtedness remains unpaid. Borrower
and Bank may rearrange, increase, decrease, extend and/or renew the Guaranteed
Indebtedness without notice to Guarantor and in such event Guarantor will remain
fully bound hereunder on the Guaranteed Indebtedness. The obligations of
Guarantor hereunder shall not be released, impaired or diminished by any
amendment, modification or alteration of the Loan Agreement or the Note.
Guarantor expressly waives all notices of any kind, presentment for payment,
demand for payment, protest, notice of protest, notice of intent to accelerate,
notice of acceleration, dishonor, diligence, notice of any amendment of the Loan
Agreement, notice of any adverse change in the financial condition of Borrower,
notice of any adjustment, indulgence, forbearance or compromise that might be
granted or given by Bank to Borrower, and also notice of acceptance of this
Guaranty, acceptance on the part of Bank being conclusively presumed by its
request for this Guaranty and delivery of the same to it. The liability and
obligations of Guarantor hereunder shall not be affected or impaired by any
action or inaction by Bank in regard to any matter waived or notice of which is
waived by Guarantor in this paragraph or in any other paragraph of this
Guaranty.
4. Guarantor authorizes Bank, without notice or demand and without
affecting Guarantor's liability hereunder, (a) to take and hold security for the
payment of this Guaranty and/or the Guaranteed Indebtedness, and to exchange,
enforce, waive and/or release any such security; (b) to apply such security and
direct the order or manner of sale thereof as Bank in its discretion may
determine; (c) to obtain a guaranty of the Guaranteed Indebtedness from any one
or more other persons, corporations or entities whomsoever and to enforce,
waive, rearrange, modify, limit or
2
<PAGE> 3
release at any time or times such other persons, corporations or entities from
their obligations under such guaranties; (d) to waive or delay the exercise of
any of its rights or remedies against the Borrower or any other person or
entity; (e) to renew, extend, or modify the terms of any of the Guaranteed
Indebtedness or any instrument or agreement evidencing the same; and (f) to
fully or partially release at any time any Guarantor which executes this
Guaranty whether with or without consideration.
5. Guarantor waives any right to require Bank to (a) proceed against,
or make any effort at the collection of the Guaranteed Indebtedness from
Borrower or any other guarantor or party liable for the Guaranteed Indebtedness;
(b) proceed against or exhaust any collateral held by Bank; or (c) pursue any
other remedy in Bank's power whatsoever. Guarantor further waives any and all
rights and remedies which Guarantor may have or be able to assert by reason of
the provisions of Chapter 34 of the Texas Business and Commerce Code. Guarantor
waives any defense arising by reason of any disability, lack of corporate
authority or power, or other defense of Borrower or any other guarantor of the
Guaranteed Indebtedness, and Guarantor shall remain liable under this Guaranty
regardless of whether Borrower or any other guarantor be found not liable on the
Guaranteed Indebtedness for any reason including, without limitation, insanity,
minority, disability, bankruptcy, insolvency, death or corporate dissolution,
even though rendering the Guaranteed Indebtedness void or unenforceable or
uncollectible as against Borrower or any other guarantor. This Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization of
Borrower or otherwise, all as though such payment had not been made and will,
thereupon, guarantee payment of such amount as to which refund or restitution
has been made, together with interest accruing thereon subsequent to the date of
refund or restitution at the applicable rate under the Loan Agreement and
collection costs and fees (including, without limitation, attorneys' fees)
applicable thereto, subject to the limitations set forth in Sections 1 and 10
hereof.
6. The liability and obligations of Guarantor hereunder shall not be
affected or impaired by (a) the failure of Bank or any other party to exercise
diligence or reasonable care in the preservation, protection or other handling
or treatment of all or any part of the collateral securing payment of all or any
part of the Guaranteed Indebtedness, (b) the failure of any security interest or
lien intended to be granted or created to secure the Guaranteed Indebtedness to
be properly perfected or created or the unenforceability of any security
interest or lien for any other reason, or (c) the subordination of any such
security interest or lien to any other security interest or lien.
7. Bank may pursue any remedy without altering the obligations of
Guarantor hereunder and without liability to Guarantor, even though Bank's
pursuit of such remedy may result in Guarantor's loss of rights of subrogation
or to proceed against others for reimbursement or contribution or any other
right. In no event shall any payment by Guarantor entitle it, by subrogation or
otherwise, to any rights against Borrower or any right to participate in any
security now or hereafter held by Bank prior to payment in full of all of the
Guaranteed Indebtedness and, in any
3
<PAGE> 4
event, not until 367 days after the making of any payment and/or the granting of
any security interest by Borrower or any other guarantor to Bank in connection
with the Guaranteed Indebtedness.
8. Should the status of Borrower change in any way, including, without
limitation, as a result of any dissolution of Borrower, any sale, lease or
transfer of any or all of the assets of Borrower, any changes in the
shareholders of Borrower, or any reorganization of Borrower, this Guaranty shall
continue, and shall cover the Guaranteed Indebtedness under the new status.
9. The liability of Guarantor for the payment of the Guaranteed
Indebtedness shall be primary and not secondary.
10. Guarantor is familiar with and has independently reviewed the books
and records regarding the financial condition of Borrower and is familiar with
the value of any and all collateral intended to be granted as security for the
payment of the Guaranteed Indebtedness; Guarantor is not, however, relying on
such financial condition or such collateral as an inducement to enter into this
Guaranty. As of the date hereof, and after giving effect to this Guaranty and
the contingent obligations evidenced hereby, Guarantor is, and will be, solvent,
and has and will have assets and property which, valued fairly, exceed such
Guarantor's obligations, debts and liabilities (such excess being herein called
the "Net Worth" of the Guarantor), and has and will have assets and property
sufficient to satisfy, repay and discharge the same. The liability of Guarantor
hereunder is limited to (a) the lowest amount that would render this Guaranty
void against creditors or creditors' representatives under any fraudulent
conveyance or similar law or under Sections 544 or 548 of the Bankruptcy Code of
1978, as revised, minus (b) $1.00.
11. If Borrower shall at any time or times be or become obligated to
Bank for payment of any indebtedness other than the Guaranteed Indebtedness,
Bank (without in anywise impairing its rights hereunder or diminishing
Guarantor's liability) shall be at liberty at any time or times to apply to such
other indebtedness any amounts paid to or received by or coming into the hands
of Bank from or attributable to Borrower or any other person or party liable for
any of such other indebtedness or from or attributable to or representing
proceeds of any property or security held by Bank securing payment of such other
indebtedness or any credits, deposits or offsets due Borrower or other party
liable on any of such other indebtedness (whether or not the Guaranteed
Indebtedness or such other indebtedness are then due), it being intended to give
Bank the right to apply all payments, credits and offsets and amounts becoming
available for application on or credit against the indebtedness of Borrower to
Bank (now or hereafter existing) first toward payment and satisfaction of the
Borrower's indebtedness not hereby guaranteed, before making application thereof
on or against the Guaranteed Indebtedness.
12. Guarantor represents and warrants that this Guaranty accurately and
completely embodies the entire agreement between Guarantor and Bank with respect
to the respective rights, obligations and liabilities of Guarantor and Bank
hereunder, and supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof. Guarantor
4
<PAGE> 5
acknowledges that Guarantor is not relying on any representations (oral or
otherwise) of Bank, or any other party, other than as expressly described in
this Guaranty.
13. This Guaranty was reviewed by Guarantor, and Guarantor acknowledges
and agrees that Guarantor (a) understands fully all of the terms of this
Guaranty and the consequences and implications of Guarantor's execution of this
Guaranty, and (b) has been afforded an opportunity to have this Guaranty
reviewed by, and to discuss the terms, consequences and implications of this
Guaranty with an attorney or other such persons as Guarantor may have desired.
14. This Guaranty is and shall be in every particular available to the
successors and assigns of Bank and is and shall always be fully binding upon the
heirs, executors, administrators, successors or assigns of Guarantor. This
Guaranty is intended for and shall inure to the benefit of Bank and each and
every other person who shall from time to time be or become the owner or holder
of any of the Guaranteed Indebtedness, and each and every reference herein to
"Bank" shall also include and refer to each and every successor or assignee of
Bank at any time holding or owning any part of or interest in any part of the
Guaranteed Indebtedness. This Guaranty shall be transferable and negotiable,
with the same force and effect and to the same extent that the Guaranteed
Indebtedness is transferable, it being understood and stipulated that upon the
assignment or transfer by Bank of any of the Guaranteed Indebtedness the legal
or beneficial owner of the Guaranteed Indebtedness (or part thereof or interest
therein thus transferred or assigned by Bank) shall also, unless provided
otherwise by Bank in its assignment, have and may exercise all of the rights
granted to Bank under this Guaranty to the extent of the part of or interest in
the Guaranteed Indebtedness thus assigned or transferred to such person or
entity. Guarantor expressly waives notice of transfer or assignment of the
Guaranteed Indebtedness, or any part thereof, or of the rights of Bank
hereunder.
15. All amounts becoming payable by Guarantor to Bank under this
Guaranty shall be payable at Bank's offices in the City of Houston, Harris
County, Texas.
16. Any notice hereunder to Guarantor shall be in writing, duly stamped
and addressed to Guarantor at the address shown below Guarantor's signature
hereto, or at such other address as Guarantor may by written notice, received by
Bank, have designated as Guarantor's address for such purpose. Any notice
provided for herein shall become effective upon the earlier of (a) the first
business day of Bank following the deposit in a regularly maintained receptacle
for the United States, or (b) the day of its receipt by Guarantor; but actual
notice, however given or received, shall always be effective. The preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason.
17. It is the intention of the parties hereto to comply strictly with
all applicable usury laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Guaranty, or in any documents securing
payment hereof or otherwise relating hereto, in no event shall this Guaranty or
such documents require the payment or permit the collection of an aggregate
5
<PAGE> 6
amount of interest in excess of the maximum amount permitted by such laws,
including the laws of the State of Texas and the laws of the United States of
America. If any such excess of interest is contracted for, charged or received
under this Guaranty or under the terms of any documents securing payment hereof
or otherwise relating hereto, or if under any circumstances, the amount of
interest (including all amounts payable hereunder which are not denominated as
interest but which constitute interest under the applicable laws) contracted
for, charged or received under this Guaranty shall exceed the maximum amount of
interest permitted by the applicable usury laws, then in any such event (a) the
provisions of this paragraph shall govern and control, (b) Guarantor shall not
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum amount of interest permitted by the applicable usury laws,
(c) any such excess interest which may have been collected shall be either
applied as a credit against the then unpaid Guaranteed Indebtedness or, if the
Guaranteed Indebtedness shall have been paid in full, refunded to Guarantor, and
(d) the effective rate of interest shall be automatically reduced to the maximum
lawful contract rate allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction thereof. It is further agreed that
without limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received under this Guaranty or under such other
documents which are made for the purpose of determining whether such rate
exceeds the maximum lawful contract rate, shall be made, to the extent permitted
by applicable usury laws, by amortizing, prorating, allocating and spreading in
equal parts during the full period during which this Guaranty is to be in
effect, all interest at any time contracted for, charged or received from
Guarantor or otherwise by the holder or holders hereof in connection with this
Guaranty.
18. In case any of the provisions of this Guaranty shall for any reason
be held to be invalid, illegal, or unenforceable, such invalidity, illegality,
or unenforceability shall not affect any other provisions hereof, and this
Guaranty shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
19. In all instances herein, the singular shall be construed to include
the plural and the masculine to include the feminine.
20. This Guaranty may be executed in multiple counterparts each of
which shall constitute an original, but all of which when taken together shall
constitute one and the same Guaranty.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. All actions or
proceedings with respect to the Guaranteed Indebtedness or this Guaranty may be
instituted in the Courts of the State of Texas located in Harris County, Texas,
or the United States District Court for the Southern District of Texas, and by
execution and delivery of this Guaranty, Guarantor irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such Court, and irrevocably and unconditionally waives (a) any objection
Guarantor may now or hereafter have to the laying of venue in any such Courts,
(b) any claim that any action or proceeding brought in any of such Courts has
been brought in an
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<PAGE> 7
inconvenient forum, and (c) any right to bring any action or proceeding with
respect to the Guaranteed Indebtedness or this Guaranty in any forum other than
the courts of the State of Texas located in Harris County, Texas, or the United
States District Court for the Southern District of Texas.
22. The undersigned signing for and on behalf of Guarantor represents
and warrants to Bank that he is duly authorized and empowered to execute this
Guaranty for and on behalf of Guarantor and that this Guaranty is a valid,
binding and enforceable obligation of Guarantor and does not violate any
provisions of its articles or certificate of incorporation or its bylaws or any
agreement creating and establishing Guarantor as a legal entity and setting
forth Guarantor's purposes or powers, as applicable, or any law, rule,
regulation, contract or agreement enforceable against Guarantor.
EXECUTED this 5th day of June, 1998.
GUARANTOR:
---------------------------------------------
By: /s/ Richard W. McNairy
----------------------------------------
Richard W. McNairy
Vice President
Address: 50 Briar Hollow Lane
West Building, 6th Floor
Houston, Texas 77027
7
<PAGE> 1
EXHIBIT 10.10
MASTER SECURITY AGREEMENT NO. 32567
LENDER: FLEET CAPITAL CORPORATION CUSTOMER: EAGLE GEOPHYSICAL ONSHORE, INC.
a Rhode Island corporation a Delaware Corporation
ADDRESS: 50 Kennedy Plaza ADDRESS: 50 Briar Hollow Lane
Providence, Rhode Island 02903-2305 6th Floor West
Houston, TX 77027
1. GRANT OF SECURITY INTEREST; DEFINITIONS.
Subject to the terms and conditions set forth herein (the "MASTER
SECURITY AGREEMENT") and in any Equipment Security Agreement Schedule
incorporating the terms of this Master Security Agreement (each, an "EQUIPMENT
SCHEDULE"), Customer hereby grants to Fleet Capital Corporation ("LENDER") a
security interest in and to all Collateral (hereinafter defined) in order to
secure the payment and performance of all Obligations (hereinafter defined),
including but not limited to any Obligations evidenced by one or more promissory
or installment notes which specifically refer to an Equipment Schedule (the
"NOTE(S)"). The extent to which Lender's security interest in any item of
Collateral shall be entitled to purchase money priority shall be determined by
reference to the unpaid principal balance of any Note evidencing the financing
of the purchase price of such item of Equipment.
References to "THE SECURITY AGREEMENT," "THIS SECURITY AGREEMENT" or
"ANY SECURITY AGREEMENT" shall mean and refer to any Equipment Schedule which
incorporates the terms of this Master Security Agreement, together with all
exhibits, addenda, schedules, certificates, riders and other documents and
instruments executed and delivered in connection with such Equipment Schedule,
all as the same may be amended or modified from time to time. Each Equipment
Schedule shall constitute a separate, distinct and independent security
agreement and contractual obligation of Customer. "AFFILIATE" means, with
respect to any person, firm or entity, any other person, firm or entity
controlling, controlled by, or under common control with such person, firm or
entity, and for this purpose, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of any such person, firm or entity, whether through the legal or
beneficial ownership of voting securities, by contract or otherwise.
Notwithstanding anything to the contrary, Seitel, Inc. and its wholly-owned
subsidiaries shall not be an Affiliate of Customer for purposes of this Security
Agreement. "COLLATERAL" means the Equipment and all present or future additions,
attachments, accessions or accessories thereto and replacements thereof, all
tools, manuals, service records, software and similar information and materials
related to such Equipment, and the proceeds, from the sale, lease or other
disposition of the Equipment, in the form of goods, accounts, chattel paper,
documents, instruments and general intangibles, and insurance proceeds payable
in respect of loss or damage to such Collateral. "EQUIPMENT" means machinery and
equipment now owned or hereafter acquired by Customer, wherever the same may be
located, which is described in one or more Equipment Schedules entered into from
time to time by the parties hereto. The term "ITEM OF EQUIPMENT" shall mean each
functionally integrated and marketable group or unit of Equipment; and any
determination of the outstanding principal balance of the Note
<PAGE> 2
with respect to any item of Equipment shall include the unpaid total amount of
all vendor or seller invoices (including Customer invoices, if any) for such
group or unit of Equipment, together with all costs of delivery, installation,
testing and related services, accessories, supplies or attachments from vendors
or supplier's thereof (including Customer provided items) financed by Lender in
connection with such group or unit of Equipment, together with all acquisition
fees and costs of delivery, installation, testing and related services,
accessories, supplies or attachments procured or financed by Lender from vendors
or suppliers thereof (including items provided by Customer) relating to or
allocable to such item of Equipment ("RELATED EXPENSES"). "OBLIGATIONS" means
all indebtedness, obligations and liabilities of Customer or any Affiliate of
Customer owing to Lender of every kind and description, direct or indirect,
secured or unsecured, joint or several, absolute or contingent, due or to become
due, whether for payment or performance, now existing or hereafter arising,
regardless of how the same arise or by what instrument, agreement or book
account they may be evidenced, or whether evidenced by any instrument, agreement
or book account, including, without limitation, all loans (including any loan by
renewal or extension of existing indebtedness or liability), all indebtedness,
all obligations for the deferred purchase price or rental of any property or of
any of the Collateral, all undertakings to take or refrain from taking any
action, and all interest, taxes, fees, charges, expenses and attorneys fees
chargeable to Customer or incurred by Lender under this Security Agreement, or
any other document or instrument delivered in connection herewith. As used
herein with respect to any Obligation or Equipment or Collateral: (a) the
following terms shall have the meanings or values defined or assigned to them in
the applicable Equipment Schedule therefor: "ACCEPTANCE DATE," "ADVANCE
PAYMENT(S)," "EQUIPMENT LOCATION(S)," "SECURITY DEPOSIT"; and (b) the following
terms shall have the meanings or values assigned to them in the applicable Note
therefor: "PAYMENTS," "PAYMENT DATES," "MATURITY DATE," "INTEREST RATE." To the
extent not otherwise specifically defined in this Master Security Agreement,
unless the context otherwise requires, all other terms contained in this Master
Security Agreement shall have the meanings assigned or referred to them in the
Uniform Commercial Code in force in the State of Rhode Island (the "UCC") to the
extent the same are used or defined therein.
2. CUSTOMER REPRESENTATIONS, WARRANTIES, COVENANTS.
Customer hereby represents and warrants to and covenants with Lender
that, as of the date hereof and for so long as any Obligations shall remain
outstanding: (a) Customer is duly organized and is existing in good standing
under the laws of its jurisdiction of organization and is duly qualified and in
good standing in those jurisdictions where the conduct of its business or the
ownership of its properties requires qualification, except where failure to be
so qualified does not have a material adverse effect on Customer; (b) Customer
has the power and authority to own the Collateral, to enter into and perform
this Security Agreement and any other document or instrument delivered in
connection herewith and to incur the Obligations; (c) Customer's chief executive
office is located at the address set forth above and Customer shall furnish
Lender with at least 30 days prior written notice of any change thereto; (d)
Customer utilizes no trade names in the conduct of its business; (e) Customer
has not changed its name, been the surviving entity in a merger, acquired any
business; or changed the location of its chief executive office within the
previous five years, except as may have been specifically disclosed to Lender in
writing prior to the date hereof and 30 days prior to such future event; (f) the
execution and performance of this Security Agreement, the Notes
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<PAGE> 3
and any other document or instrument delivered in connection herewith will not
result in the creation or imposition of any lien or encumbrance upon any of the
Collateral, except in favor of Lender pursuant hereto; (g) this Security
Agreement, the Notes and any document or instrument delivered in connection
herewith and the transactions contemplated hereby or thereby are duly
authorized, executed and delivered, and this Security Agreement, the Notes and
such other documents and instruments constitute valid and legally binding
obligations of Customer and are enforceable against Customer in accordance with
their respective terms; (h) Customer has filed all federal, state and local tax
returns and other reports it is required to file and has paid or made adequate
provision for payment of all such taxes, assessments and other governmental
charges; (i) Except as disclosed in writing by Customer to Lender from time to
time promptly upon Customer's knowledge thereof, there are no pending or
threatened actions or proceedings before any court or administrative agency
which materially adversely affect Customer's financial condition or operations;
(j) no representation, warranty or statement by Customer contained herein or in
any certificate or other document furnished or to be furnished by Customer
pursuant hereto contains or at the time of delivery shall contain any untrue
statement of material fact, or omits, or shall omit at the time of delivery, to
state a material fact necessary to make it not misleading; (k) Customer shall
cause Eagle Geophysical, Inc. (hereinafter "GUARANTOR") to furnish Lender: (x)
within 120 days after the close of each fiscal year of Guarantor, a copy of its
consolidated financial statements, including a balance sheet, income statement,
statement of retained earnings and a statement of cash flows, prepared in
accordance with GAAP (as hereinafter defined) and signed by an independent
certified public accountant satisfactory to Lender in its reasonable discretion;
(y) within 45 days after the close of each of the first three (3) quarters of
each fiscal year of Guarantor, unaudited consolidated financial statements
similar to those described in the immediately preceding clause, prepared by
Guarantor in accordance with GAAP (as hereinafter defined) and certified by the
chief financial officer of Guarantor; and (z) promptly upon request of Lender,
in form satisfactory to Lender, such other and additional information as Lender
may reasonably request from time to time; (l), Customer shall permit Lender,
through its authorized attorneys, accountants and representatives, to inspect
and examine the Collateral and the books, accounts, records, ledgers and assets
of every kind and description of Customer with respect thereto at all reasonable
times, provided, however, for so long as no Event of Default (or event or
condition which, with the passage of time or giving of notice, or both, would
become such an Event of Default) has occurred and is continuing, Lender shall
provide prior written notice to Customer of such inspection and examination; (m)
Customer shall promptly inform Lender of any Defaults (defined below) or any
events or changes in the financial condition of Customer occurring since the
date of the last financial statements of Customer delivered to Lender which,
individually or cumulatively, when viewed in light of prior financial
statements, may result in a material adverse change in the financial condition
of Customer; (n) Customer shall pay or deposit promptly when due all sales, use,
excise, personal property, income, withholding, corporate, franchise and other
taxes, assessments and governmental charges upon or relating to its ownership or
use of any of the Collateral and submit to Lender upon request, proof
satisfactory to Lender that such payments and/or deposits have been made; (o) if
Customer shall now or hereafter maintain an employee benefit plan covered by
Section 4021(a) of the Employee Retirement Income Security Act of 1974
("ERISA")relating to plan termination insurance, Customer is not aware as of the
date hereof, and shall promptly notify Lender hereafter upon notice or knowledge
of: (x) the filing of notice with the Pension Benefit Guaranty
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<PAGE> 4
Corporation (the "PBGC") pursuant to Section 4041 of ERISA that such plan is to
be terminated; and (y) the institution of proceedings by the PBGC under Section
4042 of ERISA; (p) Customer shall at any time and from time to time upon request
of Lender, execute and deliver to Lender, in form and substance satisfactory to
Lender, such documents as Lender shall deem necessary or desirable to perfect or
maintain perfected the security interest of Lender in the Collateral or which
may be necessary to comply with the provisions of the law of any jurisdiction in
of which Customer may then be conducting business or in which any of the
Collateral may be located and (q) throughout the term of this Security
Agreement, Guarantor shall comply, with all of the following financial
covenants:
(i) Current Ratio. Guarantor shall maintain a Current Ratio, of not less than
1.15 to 1, determined as of the end of Guarantor's fiscal year.
(ii) Minimum Tangible Net Worth. Guarantor's minimum Tangible Net Worth shall
be not less than (a) $45,000,000.00 or (b) 95% of the equity raised by the
August 11, 1997, initial public offering of the common stock, plus 70% of
positive Net Income determined as of the end of Guarantor's most recent fiscal
quarter .
(iii) Minimum Quarterly Cash Flow. Guarantor's ratio of cash flow to Debt
Service shall not be less than 1.25 to 1.
(iv) Disparity between proforma and audited results for fiscal year 1997 .
Guarantor's audited figures for Guarantor's fiscal year 1997 shall not be
qualified or materially different from the proforma information, dated September
30, 1997 and December 31, 1997, and provided to Lender by Guarantor.
(v) Certification of Compliance. Customer shall cause Guarantor to furnish,
within 45 days of the end of each of Guarantor's fiscal quarters, and within 120
days of each of Guarantor's fiscal year ends, a Compliance Certificate,
substantially in the form of Exhibit A attached hereto, certified by Guarantor's
chief financial officer, as to the compliance with the above-referenced
covenants.
For purposes of calculating the foregoing covenants, the following definitions
shall apply:
"Cash Flow" shall be defined as the sum of net income plus depreciation and
other non-cash charges less non-cash income of Guarantor.
"Current Assets" shall mean at any time, all assets that should in accordance
with GAAP (as hereinafter defined), be classified as current assets.
"Current Liabilities" shall mean at any time, all liabilities that should in
accordance with GAAP (as hereinafter defined), be classified as current
liabilities.
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<PAGE> 5
"Current Ratio" shall be defined as Current Assets divided by Current
Liabilities, excluding current maturities of long term debt.
"Debt Service" shall be defined for any fiscal quarter as the sum of (a)
principal amounts required to be paid during such quarter on indebtedness other
than in connection with Guarantor's revolving line of credit with Bank One,
Texas, N.A., plus (b) lease payments required to be paid during such quarter in
connection with capital leases, plus (c) the outstanding principal balance due
at the beginning of such quarter on Guarantor's revolving line of credit with
Bank One, Texas, N.A., divided by sixteen.
"GAAP" shall mean generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Person" means an individual, company, corporation, partnership, limited
partnership, joint venture, trust, association, unincorporated organization or a
government or any agency or political subdivision thereof.
"Tangible Net Worth" means the total assets of Guarantor exclusive of (a) those
assets classified as intangible, including, without limitation, goodwill,
patents, trademarks, trade names, copyrights, franchises and deferred charges,
(b) treasury stock and minority interests in any Person, (c) cash set apart and
held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock, (d) to the extent not already
deducted from total assets, allowances for depreciation, depletion, obsolescence
and/or amortization or properties, uncollectible accounts, and contingent but
probable liabilities as to which an amount can be established, (e) deferred
taxes and (f) all assets arising from advances to officers, former officers or
sales representatives of Guarantor made outside of the ordinary course of
business; less total liabilities of Guarantor.
All other financial terms contained herein that are not specifically defined
herein shall have meanings determined in accordance with GAAP. The foregoing
covenants shall be calculated based on Guarantor's consolidated financial
statements.
3. COLLATERAL REPRESENTATIONS, WARRANTIES, COVENANTS.
Customer hereby further represents and warrants to and covenants with
Lender that, as of the date hereof and for so long as any Obligations shall
remain outstanding: (a) Customer is the owner of the Collateral free and clear
of all rights, title, security interests, encumbrances or liens of any other
party other than Permitted Liens (as hereinafter defined), and Customer will
defend the Collateral against all claims and demands of all persons at any time
claiming any interest therein; (b) the Equipment is personal property even
though the Equipment may hereafter become attached
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<PAGE> 6
or affixed to real property; (c) the location(s) where the Collateral is stored
when not being used by Customer on a project, if not owned by Customer, are
leased by Customer pursuant to valid leases or rental agreements which permit
the possession, use and operation of the Equipment at said locations; (d)
Customer shall provide Lender with disclaimers and waivers from landlords,
mortgagees and other persons holding any interest or claim in and to any such
location or any Collateral, reasonably acceptable in all respects to Lender,
which may be necessary or advisable in the sole discretion of Lender to confirm
that the first priority security interest and rights of Lender in the Collateral
are and will remain valid against all other parties; (e) Customer shall not,
without the prior written consent of Lender, sell, offer to sell, lease, rent,
hire or in any other manner dispose, transfer or surrender use and possession of
any Equipment; (f) Customer will not, directly or indirectly, create, incur or
permit to exist any lien, encumbrance, mortgage, pledge, attachment or security
interest on or with respect to the Equipment except in favor of Lender under the
terms of this Security Agreement; (g) Customer shall deliver to Lender any and
all evidence of ownership of, and certificates of title to, any and all of the
Equipment; (h) Customer shall permit each item of Equipment to be used only
within the continental United States by qualified personnel solely for business
purposes and the purpose for which it was designed and, at its sole expense,
shall service, repair, overhaul and maintain each item of Equipment in the same
condition as when received, ordinary wear and tear excepted, in good operating
order, consistent with prudent industry practice (but, in no event less than the
same extent to which Customer maintains other similar equipment in the prudent
management of its assets and propertie(s) and in compliance with all applicable
laws, ordinances, regulations, and conditions of all insurance policies required
to be maintained by Customer under the Security Agreement and all manuals,
orders, recommendations, instructions and other written requirements as to the
repair and maintenance of such item of Equipment issued at any time by the
vendor and/or manufacturer thereof (i) Customer shall furnish to Lender such
information concerning the condition, location, use and operation of the
Equipment as Lender may request; (j) Customer shall permit any person designated
by Lender to visit and inspect any item of Equipment and any records maintained
in connection therewith, provided, however, that the failure of Lender to
inspect the Equipment or to inform Customer of any noncompliance shall not
relieve Customer of any of its Obligations hereunder, and further provided, that
for so long as no Event of Default (or event or condition which, with the
passage of time or giving of notice, or both, would become such an Event of
Default) has occurred and is continuing, Lender shall provide prior written
notice to Customer of such inspection; (k) if any item of Equipment does not
comply with the requirements of this Security Agreement, Customer shall, within
30 days of written notice from Lender, bring such Equipment into compliance with
the provisions hereof; (l) Customer shall not use any Equipment, nor allow the
same to be used, for any unlawful purpose, nor in connection with any property
or material that would subject the Lender to any liability under any state or
federal statute or regulation pertaining to the production, transport, storage,
disposal or discharge of hazardous or toxic waste or materials and (m) from time
to time promptly upon the written request of Lender, Customer shall provide
Lender with a certificate executed by a duly authorized officer of Customer
certifying the location of the Equipment and, a description of the vehicle which
the Equipment is attached and the identity of any owner of such vehicle and/or
of any third party which claims a security interest in such vehicle. Promptly
upon the attaching of the Equipment to a vehicle, Customer shall either certify
to Lender that the owner of such vehicle and any third party security
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<PAGE> 7
interest holder in such vehicle do not claim any interest in the vehicle or, to
the extent that Customer has not already provided a release of any such interest
to Lender, provide Lender with releases of any interest in the Equipment from
any third party owner of the Equipment to which the Equipment becomes affixed
and/or from any third party which claims a security interest in the Equipment to
which the Equipment becomes attached. Such release shall be satisfactory in form
and substance to the Lender.
As used herein, Permitted Liens means (a) claims or liens for taxes,
assessments, or similar charges, incurred in the ordinary course of business
that are not yet due and payable or (b) claims or liens for taxes, assessments,
or similar charges, that are due and remain unpaid, if the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings,
so long as levy and execution thereon have been stayed and continue to be
stayed, and in Lender's sole judgment said proceedings do not, separately or in
the aggregate involve any danger of the sale, forfeiture or loss of, or the loss
of the use of, an item of Equipment or any interest therein.
4. SELECTION AND USE OF EQUIPMENT; DISCLAIMER OF WARRANTIES.
Customer has selected each item of Equipment and the manufacturer
and/or supplier thereof based on its own judgment, and expressly disclaims any
reliance upon any statements or representations made by Lender. If the Equipment
is not delivered, is not properly installed, does not operate as warranted by
the manufacturer or supplier thereof, becomes obsolete, or is unsatisfactory for
any reason whatsoever, Customer shall make all claims on account thereof solely
against the manufacturer or supplier thereof and not against Lender. Customer
acknowledges that neither the manufacturer or supplier of the Equipment, nor any
sales representative or agent thereof, is an agent of Lender, and no agreement
or representation as to the Equipment or any other matter by any such sales
representative or agent of the manufacturer or supplier shall in any way affect
any of the Notes or the Obligations.
LENDER IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT
THEREOF, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY
MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE
EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS
CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE
MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO
THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR
PATENT INFRINGEMENTS, AND LENDER HEREBY DISCLAIMS ANY SUCH WARRANTY. LENDER IS
NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR
FAILURES IN THE OPERATION THEREOF.
5. RISK OF LOSS AND DAMAGE; INSURANCE.
Customer assumes all risk of loss, damage or destruction to the
Equipment from whatever cause and for whatever reason. If all or a portion of an
item of Equipment shall become lost, stolen, destroyed, damaged beyond repair or
rendered permanently unfit for use for any reason, or in the
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<PAGE> 8
event of any condemnation, confiscation, theft or seizure or requisition of
title to or use of such item ("EVENT OF LOSS"), Customer shall promptly either:
(i) pay to Lender an amount equal to the outstanding principal balance of the
applicable Note with respect to such item of Equipment as of the next following
Payment Date, plus all accrued interest and other charges then due and owing
hereunder and under the Note or (ii) upon delivery of at least fifteen (15) days
prior written notice to Lender, Customer may substitute any item of Equipment
with other equipment of like kind and having the same or greater value, utility
and useful life ("REPLACEMENT EQUIPMENT"). Notwithstanding any such Event of
Loss, in the event of any such substitution the Customer's obligation to pay
hereunder and under the applicable Note shall continue. In the event of any
substitution of Equipment with Replacement Equipment, immediately upon
effectiveness of such substitution and without further act: (i) Lender shall be
named as lienholder as to the Replacement Equipment, (ii) title to the replaced
Equipment shall thereupon be free and clear of all the Lender's liens and shall
no longer be deemed Equipment hereunder; and (iii) such Replacement Equipment
shall become Equipment for all purposes under this Security Agreement. Upon the
substitution of Replacement Equipment, the following documents shall be duly
authorized, executed and delivered by the respective party or parties thereto
and shall be in full force and effect delivered to the Lender at no cost or
expense to the Lender; (a) a substitution agreement in form and substance
acceptable to Lender; (b) evidence satisfactory to Lender that the Replacement
Equipment is of like kind and has equal or greater value, useful life and
utility than the Equipment it replaces; (c) all documentation reasonably
requested by Lender to effectuate a first-in-priority lien and security interest
in the Replacement Equipment being substituted; and (d) all other documents
Lender reasonably deems necessary. For so long as any Obligations shall remain
outstanding, Customer shall procure and maintain insurance in such amounts and
with such coverages, and upon such terms and with such companies, as Lender may
approve, at Customer's expense, provided, however, that in no event shall such
insurance be less than the following coverages and amounts: (a) Worker's
Compensation and Employer's Liability Insurance, in the full statutory amounts
provided by law; (b) Comprehensive General Liability Insurance including
product/completed operations and contractual liability coverage, with minimum
limits of the greater of: (i) $ 1,000,000 each occurrence, and Combined Single
Limit Bodily Injury and Property Damage, $ 1,000,000 aggregate, where
applicable, or (ii) as otherwise specified in any Equipment Schedule hereto; and
(c) All Risk Physical Damage Insurance, including earthquake and flood, on each
item of Equipment, in an amount not less than the greater of (i) the outstanding
principal balance owing under any Note with respect to the Equipment; or (ii)
its full replacement value. On each such policy Lender will be included as an
additional insured and loss payee as its interest may appear. Such policies
shall be endorsed to provide that the coverage afforded to Lender shall not be
rescinded, impaired or invalidated by any act or neglect of Customer. Customer
agrees to waive Customer's rights and its insurance carrier's rights of
subrogation against Lender for any and all loss or damage. All policies shall be
endorsed or contain a clause requiring the insurer to furnish Lender with at
least 30 days' prior written notice of any material change, cancellation or
non-renewal of coverage. Upon execution of this Security Agreement, Customer
shall furnish Lender with a certificate of insurance or other evidence
satisfactory to Lender that such insurance coverages are in effect, provided,
however, that Lender shall be under no duty either to ascertain the existence of
or to examine such insurance coverage or to advise Customer in the event such
insurance coverage should not comply with the requirements
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<PAGE> 9
hereof. If Customer shall at any time or times hereafter fail to obtain and/or
maintain any of the policies of insurance required herein, or fail to pay any
premium in whole or in part relating to any such policies, Lender may, but shall
not be obligated to, obtain and/or cause to be maintained insurance coverage
with respect to the Collateral, including, at Lender's option, the coverage
provided by all or any of the policies of Customer and pay all or any part of
the premium therefor, without waiving any Event of Default by Customer, and any
sums so disbursed by Lender shall be additional Obligations of Customer to
Lender payable on demand. Lender shall have the right to settle and compromise
any and all claims under any of the policies required to be maintained by
Customer hereunder and Customer hereby appoints Lender as its attorney-in-fact,
with power to demand, receive and receipt for all monies payable thereunder, to
execute in the name of Customer or Lender or both any proof of loss, notice,
draft or other instruments in connection with such policies or any loss
thereunder and generally to do and perform any and all acts as Customer, but for
this appointment, might or could perform.
6. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" under any Security Agreement shall be deemed to
have occurred upon the occurrence or existence of any one or more of the
following events or conditions (each a "DEFAULT") and after the giving of any
required notice or the passage of any required period of time (or both)
specified below with respect to such Default: (a) Customer shall fail to make
any Payment due under any Note within 10 days of its due date; or (b) Customer
shall fail to obtain or maintain any of the insurance required under any
Security Agreement; or (c) Customer shall fail to perform or observe any
covenant, condition or agreement under any Security Agreement, and such failure
continues for 10 days after notice thereof to Customer; or (d) Customer or any
Affiliate of Customer shall default in the payment or performance of any
Obligation owing to Lender, or any indebtedness or obligation owing to any
Affiliate of Lender, under any note, security agreement, equipment lease, title
retention or conditional sales agreement or any instrument or agreement
evidencing such indebtedness with Lender or any such Affiliate of Lender; or (e)
any representation or warranty made by Customer herein or in any certificate,
agreement, statement or document hereto or hereafter furnished Lender, including
without limitation any financial information disclosed to Lender, shall prove to
be false or incorrect in any material respect; or (f) the commencement of any
bankruptcy (which, in the case of any such involuntary proceeding is not
dismissed, terminated or stayed within ninety (90) days of such filing),
insolvency, arrangement, reorganization, receivership, liquidation or other
similar proceeding by or against Customer or any of its properties or
businesses, or the appointment of a trustee, receiver, liquidator or custodian
for Customer or any of its properties or businesses, or if Customer suffers the
entry of an order for relief under Title 11 of the United States Code; or (g)
the making by Customer of a general assignment or deed of trust for the benefit
of creditors; or (h) Customer shall default in any payment or other obligation,
with respect to any indebtedness, conditional sale, time sale, lease or other
financing obligation of which the then outstanding balance exceeds One Million
($1,000,000.00) Dollars, to any third party and any applicable grace or cure
period with respect thereto has expired; or (i) Customer shall terminate its
existence by merger, consolidation, sale of substantially all of its assets or
otherwise; or (j) if Customer is a privately held corporation, more than the 50%
of Customer's voting capital stock, or effective control of Customer's voting
capital stock, issued and outstanding from time to time, is not
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<PAGE> 10
retained by the holders of such stock on the date of this Security Agreement; or
(k) if Customer is a publicly held corporation, there shall be a change in the
ownership of Customer's stock such that Customer is no longer subject to the
reporting requirements of the Securities Exchange Act of 1934 or no longer has a
class of equity securities registered under Section 12 of the Securities Act of
1933; or (l) Guarantor shall fail to perform or observe any covenant contained
in Section 2(q) of this Master Security Agreement; or (m) any event or condition
set forth in subsections (b) through (k) of this Section 6 shall occur with
respect to any guarantor or other person liable or responsible, in whole or in
part, for payment or performance of any Obligations; or (n) any event or
condition set forth in subsections (e) through (k) shall occur with respect to
any Affiliate of Customer. Customer shall promptly notify Lender of the
occurrence of any Event of Default or the occurrence or existence of any event
or condition which, upon the giving of notice of lapse of time, or both, would
constitute an Event of Default.
7. RIGHTS AND REMEDIES; MANDATORY PREPAYMENT.
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies enumerated herein (all of which are cumulative and not
exclusive of any other right or remedy available to Lender): (a) Lender may
declare, at its option, all or any part of the Obligations immediately due and
payable, without demand, notice of intention to accelerate, notice of
acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or
any other notice whatsoever, all of which are hereby waived by Customer and any
endorser, guarantor, surety or other party liable in any capacity for any of the
Obligations; (b) Lender shall have the right to enter and/or remain upon the
Equipment location(s) without any obligation to pay rent to Customer or others,
or any other place or places where any of the Collateral is located and kept
and: (i) remove Collateral therefrom to the premises of Lender or any agent of
Lender, for such time as Lender may desire, in order to maintain, collect, sell
and/or liquidate the Collateral; (ii) use such premises, together with
materials, supplies, books and records of Customer, to maintain possession
and/or the condition of the Collateral, and to prepare the Collateral for
selling, liquidating or collecting; or (iii) without removing the Collateral
from such premises, render the Collateral unusable by the Customer or by any
other party in possession thereof or with an interest therein; (c) Lender may
require Customer to assemble the Collateral and make it available to Lender at a
place to be designated by Lender; (d) Lender shall have the right to set-off,
without notice to Customer, any and all deposits or other sums at any time or
times credited by or due from Lender, to Customer, whether in a special account
or other account or represented by a certificate of deposit (whether or not
matured) which deposits and other sums may be set-off against all or any part of
the Obligations; and (e) Lender shall have, in addition to any other rights and
remedies contained in this Security Agreement and any other agreements,
guarantees, notes, instruments and documents heretofore, now or at any time or
times hereafter executed by Customer and delivered to Lender, all of the rights
and remedies of a secured party under the UCC. If Lender seeks to take
possession of any or all of the Collateral by court process, Customer hereby
irrevocably waives any bonds and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession, and waives any demand for possession prior to the commencement of
any suit or action to recover with respect thereto. Any notice required to be
given by Lender of a sale or other disposition or other intended action by
Lender with respect to any of the Collateral or otherwise which is made in
accordance with
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<PAGE> 11
the terms of this Security Agreement at least five (5) days prior to such
proposed action, shall constitute fair and reasonable notice to Customer of any
such action. Lender shall be liable to Customer only for its gross negligence or
willful misconduct in failing to comply with any applicable law imposing duties
upon Lender; Lender's liability for any such failure shall be limited to the
actual loss suffered by Customer directly resulting from such failure; and in no
event shall Lender have any liability to Customer for incidental, consequential,
punitive or exemplary damages. All expenses of retaking, holding, preparing for
sale, selling or the like and any other expenses incurred by Lender in
connection with the exercise of any of its rights and remedies hereunder shall
constitute additional Obligations secured by the Collateral hereunder. If Lender
shall employ counsel to commence, defend or intervene, file a petition,
complaint, answer, motion or other pleadings, or to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise) relating to
this Security Agreement, the Collateral or any other agreement, guaranty, note,
instrument or document heretofore, now or at any time or times hereafter
executed by Customer and delivered to Lender, or to protect, collect, lease,
sell, take possession of or liquidate any of the Collateral, or to attempt to
enforce or to enforce any security interest in any of the Collateral, or to
enforce any rights of Lender hereunder, whether before or after the occurrence
of any Event of Default, or to collect any of the Obligations, then in any of
such events, all of the reasonable attorneys' fees arising from such services,
and any expenses, costs and charges relating thereto, shall be part of the
Obligations, payable on demand and secured by the Collateral. The net proceeds
realized by Lender upon any sale or other disposition of Collateral hereunder
shall be applied toward satisfaction of all Obligations until all such
Obligations are satisfied and paid in full. Lender shall account to Customer for
any surplus realized upon such sale or other disposition, and Customer shall
remain liable for any deficiency. The commencement of any action, legal or
equitable, shall not affect the security interest of Lender in the Collateral
until all of the Obligations or any judgment with respect thereto have been
fully paid.
Customer is or may become indebted under or in respect of one or more
leases, loans, notes, credit agreements, reimbursement agreements, security
agreements, title retention or conditional sales agreements, or other documents,
instruments or agreements, whether now existing or hereafter arising, evidencing
Customer's obligations for the payment of borrowed money or other financial
accommodations owing to one or more affiliated persons, firms or entities
controlling, controlled by or under common control with Lender ("AFFILIATED
OBLIGATIONS"). If Customer pays or prepays all or substantially all of its
Affiliated Obligations, whether or not such payment or prepayment is voluntarily
or involuntarily made by Customer before or after any default or acceleration of
such Affiliated Obligations, then Customer shall pay, at Lender's option and
immediately upon notice from Lender, all or any part of Customer's Obligations
owing to Lender, including but not limited to payment of the accelerated balance
of one or more Notes as set forth in such notice from Lender.
8. ASSIGNMENT.
The provisions of this Agreement shall be binding upon and shall inure
to the benefit of the heirs, administrators, successors and assigns of Lender
and Customer, provided, however, Customer may not assign any of its rights or
delegate any of its obligations hereunder without the prior written consent of
Lender. Lender may, from time to time, without notice to the Customer, sell,
assign,
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<PAGE> 12
transfer, participate, pledge or otherwise dispose of all or any part of the
Obligations and/or the Collateral therefor. In such event, each and every
immediate and successive purchaser, assignee, transferee, participant, pledgee,
or holder of all or any part of the Obligations and/or the Collateral (each, a
"HOLDER") shall have the right to enforce this Agreement, by legal action or
otherwise, for its own benefit as fully as if such Holder were herein by name
specifically given such rights. Customer agrees that the rights of any such
Holder hereunder or with respect to the related Obligations, shall not be
subject to any defense, set off or counterclaim that Customer may assert or
claim against Lender, and that any such Holder shall have all of the Lender's
rights hereunder but none of the Lender's obligations. Lender shall have an
unimpaired right to enforce this Agreement for its benefit with respect to that
portion of the Obligations Lender has not sold, assigned, transferred,
participated, pledged or otherwise disposed of.
9. GOVERNING LAW.
THIS SECURITY AGREEMENT AND THE LEGAL RELATIONS OF THE PARTIES HERETO
SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE
OF LAW. CUSTOMER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS
OF THE STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
RHODE ISLAND FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING
OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT
MAY HAVE TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY
AGREEMENT. Any action by Customer against
Lender for any cause of action under this Security Agreement shall be brought
within two years after any such cause of action first arises.
10. MISCELLANEOUS, GENERAL PROVISIONS.
Customer agrees to pay on demand all costs and expenses of Lender
(including reasonable attorneys' fees) hereafter incurred in connection with the
amendment or modification of any Security Agreement, or any other or additional
documentation or transactions concerning the Obligations, or the care, custody,
administration, perfection or protection of any of the Collateral or any of
Lender's rights or interests therein, including, without limitation, any and all
fees and charges for searches of lien records or other public records, and any
filing, stamp and other taxes or fees payable or determined to be payable in
connection with the execution, delivery, filing, and recording of any UCC
financing statements or other recorded instrument. Customer shall execute and
deliver to Lender upon Lender's request any and all schedules, forms and other
reports and information as Lender may deem necessary or appropriate to respond
to requirements or regulations imposed by any governmental authorities. Customer
shall execute and deliver to Lender upon Lender's request such further and
additional documents, instruments and assurances as Lender deems necessary (a)
to acknowledge and confirm for the benefit of Lender or any Holder, all of the
terms and conditions of all or any part of the Obligations, this Security
Agreement and Lender's or Holder's rights with respect thereto and Customer's
compliance with all of the terms and provisions of any Obligations,
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<PAGE> 13
and (b) to preserve, protect and perfect Lender's or Holder's right, title or
interest in any Obligation or Collateral, including, without limitation, such
UCC financing statements or amendments, corporate resolutions, opinions of
counsel, certificates of compliance, notices of assignment or transfers of
interests, and restatements and reaffirmation of all Obligations and Customer's
representations and warranties with respect thereto as of the dates requested by
Lender from time to time. Lender may file or record this Security Agreement or a
memorandum or a photocopy thereof (which for the purposes hereof shall be
effective as a financing statement) so as to give notice to third parties, and
Customer hereby appoints Lender as its attorney-in-fact to execute, sign, file
and record UCC financing statements and other lien recordation documents with
respect to the Equipment, and Customer agrees to pay or reimburse Lender for any
and all filing, recording or stamp fees or taxes arising from any such filings.
THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
CONCERNING LENDER'S RIGHTS AND SECURITY INTERESTS IN THE COLLATERAL AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. CUSTOMER ACKNOWLEDGES AND CERTIFIES THAT NO SUCH
ORAL AGREEMENTS EXIST. THIS SECURITY AGREEMENT MAY NOT BE AMENDED, NOR MAY ANY
RIGHTS UNDER THE SECURITY AGREEMENT BE WAIVED, EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTY AGAINST WHOM SUCH AMENDMENT OR WAIVER
IS ASSERTED. The failure of Lender at any time or times hereafter to require
strict performance by Customer of any of the provisions, warranties, terms and
conditions contained in this Security Agreement or in any other agreement,
guaranty, note, instrument or document now or at any time or times hereafter
executed by Customer and delivered to Lender shall not waive, affect or diminish
any right of Lender at any time or times hereafter to demand strict performance
thereof. No rights of Lender hereunder shall be deemed to have been waived by
any act or knowledge of Lender, its agents, officers or employees, unless such
waiver is contained in an instrument in writing signed by an officer of Lender
and directed to Customer specifying such waiver. No waiver by Lender of any of
its rights on one occasion shall operate as a waiver of any other of its rights
or any of its rights on a future occasion. This Master Security Agreement will
not be binding on Lender until accepted and executed by Lender, notice of which
is hereby waived by Customer. Any demand or notice required or permitted to be
given hereunder shall be deemed effective three business days after being
deposited in the United States mail, and sent by certified mail, return receipt
requested, postage prepaid, addressed to Lender or to Customer at the addresses
set forth herein, or to such other address as may be hereafter provided by the
party to be notified by written notice complying with the provisions hereof.
Wherever possible, each provision of this Security Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
Should any portion of this Security Agreement be declared invalid for any reason
in any jurisdiction, such declaration shall have no effect upon the remaining
portions of this Agreement; furthermore, the entirety of this Security Agreement
shall continue in full force and effect in all other jurisdictions and said
remaining portions of this Security Agreement shall continue in full force and
effect in the subject jurisdiction as if this Security Agreement had been
executed with the invalid portions thereof deleted. This Security Agreement may
be executed in any number of counterparts, each of which
13
<PAGE> 14
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument. Time is of the essence in the payment and
performance of all of the Obligations. The section headings herein are included
for convenience only and shall not be deemed to be a part of this Security
Agreement. Each reference herein to "LENDER" shall be deemed to include its
successors and assigns, and each reference to "CUSTOMER" and any pronouns
referring thereto as used herein shall be construed in the masculine, feminine,
neuter, singular or plural, as the context may require, and shall be deemed to
include the legal representatives, successors and assigns of Customer, all of
whom shall be bound by the provisions hereof. EACH REFERENCE HEREIN TO
"CUSTOMER" SHALL MEAN AND INCLUDE ANY AND ALL CUSTOMERS WHO SIGN BELOW, EACH OF
WHOM SHALL BE JOINTLY AND SEVERALLY LIABLE UNDER THE SECURITY AGREEMENT.
Executed and delivered by duly authorized representatives of the parties hereto
as of the date set forth below.
[Signatures on next page]
14
<PAGE> 15
Dated as of: January 28, 1998
----------------------
FLEET CAPITAL CORPORATION EAGLE GEOPHYSICAL ONSHORE, INC.
By: /s/ David E. Mitchell By: /s/ R.W. McNairy
Name: David E. Mitchell Name: R.W. McNairy
Title: Vice President/Senior Lender Title: Vice President, Secretary and
----------------------------- Treasurer
--------------------------------
AGREED TO AND ACKNOWLEDGED TO THE
EXTENT THIS SECURITY AGREEMENT RELATES
TO THE UNDERSIGNED GUARANTOR:
By: /s/ Jay N. Silverman
------------------------------------
Name: Jay N. Silverman
----------------------------------
Title: President and CEO
--------------------------------
(GUARANTOR)
EAGLE GEOPHYSICAL, INC.
By: /s/ Jay N. Silverman
---------------------------------------------
Name: Jay N. Silverman
-------------------------------------------
Title: President
------------------------------------------
By: /s/ R.W. McNairy
---------------------------------------------
Name: R.W. McNairy
-------------------------------------------
Title: Vice President, Secretary and Treasurer
------------------------------------------
15
<PAGE> 1
EXHIBIT 10.11
EQUIPMENT SECURITY AGREEMENT
SCHEDULE NO. 32567-00001
Customer: EAGLE GEOPHYSICAL ONSHORE, INC
Address: 50 BRIAR HOLLOW LANE
6TH FLOOR WEST
HOUSTON, TX 77027
This Equipment Security Agreement Schedule No. 32567-00001, dated as
of FEBRUARY 11. 1998 (this "Equipment Schedule"), is entered into pursuant to
and incorporates by this reference all of the terms and provisions of that
certain Master Security Agreement No. 32567 dated as of JANUARY 28, 1998 (the
"Master Security Agreement"), by and between the undersigned parties hereto. All
capitalized terms used herein and not defined herein shall have the meanings set
forth or referred to in the Master Security Agreement. By its execution and
delivery of this Equipment Schedule, Customer hereby reaffirms all of the
representations, warranties and covenants contained in the Master Security
Agreement as of the date hereof, and further represents and warrants to Lender
that no Default has occurred and is continuing as of the date hereof.
1. Grant of Security Interest; Equipment Financed. Subject to the terms
and provisions of the Security Agreement and one or more promissory notes in
substantially the form attached hereto as Exhibit A executed and delivered by
Customer to Lender which specifically refer to this Equipment Schedule (the
"Note(s)"), Lender has agreed to provide financing in an amount not to exceed $
5,864,880.00 (unless otherwise permitted by Lender in writing) on or before JULY
28, 1998, to Customer in connection with the equipment and property described in
Schedule A attached hereto (the "Equipment"). Customer has agreed and does
hereby grant a security interest in and to the Equipment and the Collateral
related thereto, whether now owned or hereafter acquired and wherever located,
in order to secure all Obligations owing to Lender, including but not limited to
the Note(s). Lender's agreement to provide the financing contemplated herein
shall be subject to Lender's prior receipt of all documentation required by
Lender in respect of the Security Agreement and in connection with the financing
of any Equipment, in form and substance satisfactory to Lender in its sole and
absolute discretion, including but not limited to verified, completed and
properly executed Notes, Secretary Certificates, Landlord/Mortgagee Waivers,
Disclaimers of Interest and/or lntercreditor Agreements from other creditors or
parties, disbursement and payment authorizations, invoices, bills of sale, proof
of delivery, acceptance and ownership of the Equipment, lien, tax and judgment
searches, legal opinions and UCC financing statements.
2. Promissory Note(s). Upon delivery and acceptance of the Equipment,
Customer shall execute one or more Notes evidencing the amount financed by
Lender in respect of such Equipment and the Payments of principal and interest
thereunder. By its execution and delivery of each Note, such Note shall
constitute:
(a) Customer's acknowledgment that each item of Equipment has been
unconditionally accepted by the Customer for all purposes
under the Security Agreement;
(b) Customer's reaffirmation of all of the representations,
warranties and covenants as set forth in the Security
Agreement as of the date of the Note (the "Acceptance Date"),
and Customer's certification that no Default has occurred and
is continuing as of the date thereof;
(c) Customer's representation, warranty and agreement that: (i)
the equipment has been delivered and is in an operating
condition and performing the operation for which it is
intended to the satisfaction of the Customer; and (ii) if
requested by Lender, the Equipment has been marked or labeled
evidencing Lender's interest therein;
(d) Customer's authorization and direction to Lender to make
payment to each vendor of the Equipment pursuant to such
vendor's invoice or any purchase order, purchase agreement or
supply contract, receipt and approval of which shall be deemed
confirmed by Customer's execution of the Note; and
(e) Customer's absolute and unconditional obligation and agreement
to pay Lender all Payments at the times and in the manner set
forth in the Note.
<PAGE> 2
SCHEDULE A
Page 1 of 5
Attached to and made a part of the following: Insurance Certification and
Equipment Security Agreement Schedule No. 32567-01 and UCC Financing
Statement(s) with EAGLE GEOPHYSICAL ONSHORE, INC.
QTY.
- ---------------------------------------------------------------------------
LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
LOCATION (01)
Vendor: Sercel Inc.
Invoice No. Dated:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
1 Vibroseis SN388 Eagle s/n 13
588 SU4-R
Less 20% discount
1 EMI Spares, Large Kit
1 SU-6R Spares
16 Battery Charger
7 Deployment Aid
7 Power Unit Capacity Tester
1 Field Tester
SEE ATTACHED S/N LIST
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
SCHEDULE A
Page 2 of 5
Attached to and made a part of the following: Insurance Certification and
Equipment Security Agreement Schedule No. 32567-01 and UCC Financing
Statement(s) with EAGLE GEOPHYSICAL ONSHORE, INC.
QTY.
- ---------------------------------------------------------------------------
LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
Serial Numbers for the SN388 SU4-R
109 Transmittal #M-6289 dated 2/23/98
#1001-1034, 1037, 1038, 1040-4044, 1046-1049, 1052-1053
#1055, 1058, 1060-1062, 1064-1065,1067, 1069-1074, 1076
#1087, 1089-1091, 1093-1097, 1099-1101, 1103-1105, 1109, 1111
#1114-1116, 1119, 1121-1122, 1124, 1126, 1128-1129, 1131, 1133
#1138-1142, 1144-1146, 1148, 1151, 1155, 1079-1085
18 Transmittal #M-6407 dated 3/18/98
#1078, 1252, 1274, 1285, 1325, 1356, 1435-1436, 1450, 1485, 1486
#1343, 1490, 1491, 1493-1495, 1488
99 Transmittal #M-6367 dated 3/13/98
#1036, 1039, 1050-1051, 1054, 1056-1057, 1059, 1063, 1066, 1068
#1092, 1098, 1107, 1127, 1137, 1143, 1150, 1154, 1157, 1159
#1160-1166, 1168, 1170-1171, 1173-1175, 1178-1179, 1181, 1183
#1184-1187, 1189-1192, 1194-1196, 1200-1206, 1208, 1210-1211
#1213-1222, 1224-1226, 1232, 1233-1235, 1237-1238, 1240, 1248
#1249-1250, 1253, 1265, 1256, 1258, 1259, 1261-1263, 1265-1268
#1271-1273, 1198, 1230
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
SCHEDULE A
Page 3 of 5
Attached to and made a part of the following: Insurance Certification and
Equipment Security Agreement Schedule No. 32567-01 and UCC Financing
Statement(s) with EAGLE GEOPHYSICAL ONSHORE, INC.
QTY.
- ---------------------------------------------------------------------------
LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
Serial Numbers for the SN388 SU4-R
18 Transmittal #M-6455 dated 3/25/98
#1075, 1176, 1299, 1367, 1385, 1393, 1400, 1404, 1411, 1457
#1489, 1498, 1503, 1508, 1510, 1512-1513, 1487
27 Transmittal #M-6435 dated 3/24/98
#1156, 1241, 1344, 1441, 1499, 1505, 1158, 1245, 1347, 1473
#1500, 1507, 1172, 1247, 1355, 1475, 1501, 1182, 1254, 1421
#1484, 1502, 1209, 1275, 1429, 1497, 1504
48 Transmittal #M-6391 dated 3/16/98
#1086, 1167, 1227-1228, 1264, 1282, 1348, 1395, 1412, 1431
#1437, 1440, 1442, 1443, 1445-1447, 1449, 1451, 1456, 1458
#1461-1464, 1468-1469, 1472, 1474, 1476-1483, 1307-1308
#1383, 1392, 1396, 1413, 1289, 1434, 1460
21 Transmittal #M-6464 dated 3/27/98
#1108, 1197, 1528, 1516, 1136, 1454, 1470, 1522, 1534, 1419
#1533, 1506, 1426, 1284, 1520, 1270, 1432, 1521, 1527, 1328
#1531
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
SCHEDULE A
Page 4 of 5
Attached to and made a part of the following: Insurance Certification and
Equipment Security Agreement Schedule No. 32567-01 and UCC Financing
Statement(s) with EAGLE GEOPHYSICAL ONSHORE, INC.
QTY.
- ---------------------------------------------------------------------------
LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
Serial Numbers for the SN388 SU4-R
39 Transmittal #M-6480 dated 3/30/98
#1236, 1459, 1300, 1132, 1444, 1387, 1430, 1511, 1147, 1423
#1088, 1231, 1324, 1152, 1276, 1545, 1543, 1547, 1549, 1439
#1212, 1542, 1536, 1540, 1524, 1448, 1045, 1123, 1330, 1526
#1544, 1130, 1134, 1539, 1529, 1550-1552, 1525
104 Transmittal #M-6377 dated 3/13/98
#1112, 1125, 1135, 1149, 1239, 1242, 1246, 1257, 1269, 1277
#1278-1281, 1283, 1286-1288, 1290-1291, 1293-1298, 1301-1305
#1309, 1311-1323, 1326-1327, 1329, 1331, 1333-1334, 1336-1342
#1345-1346, 1349-1354, 1357-1362, 1365-1366, 1368-1371
#1373, 1375-1376, 1378-1379, 1381, 1388, 1391, 1394, 1397
#1398, 1399, 1401, 1405-1407, 1410, 1418, 1420, 1422, 1424-1425
#1427, 1433, 1389, 1414
33 Transmittal #M-6524 dated 4/7/98
#1077, 1102, 1113, 1153, 1193, 1229, 1243, 1244, 1390, 1402
#1408, 1452, 1453, 1482, 1515, 1518, 1523, 1530, 1532, 1535
#1537, 1538, 1541, 1546, 1553, 1554, 1556, 1557, 1559, 1660
#1575, 1609, 1643
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
SCHEDULE A
Page 5 of 5
Attached to and made a part of the following: Equipment Security Agreement
Schedule No. 32567-01 and UCC Financing Statement(s) with EAGLE GEOPHYSICAL
ONSHORE, INC.
QTY.
- ---------------------------------------------------------------------------
LOCATION, VENDOR, DESCRIPTION MODEL NO. SERIAL NO.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
Serial Numbers for the SN388 SU4-R
41 Transmittal #M-6547 dated 4/13/98
#1110, 1117, 1118, 1169, 1188, 1199, 1207, 1223, 1292, 1308
#1332, 1364, 1372, 1377, 1384, 1409, 1416, 1428, 1438, 1455
#1465, 1471, 1509, 1514, 1517, 1519, 1548, 1555, 1558, 1654
#1655, 1670, 1698, 1699, 1700, 1701, 1712, 1714, 1715, 1729
#1734
30 Transmittal #M-6572 dated 4/21/98
#1035, 1771, 1778, 1779, 1251, 1260, 1310, 1335, 1496, 1576
#1709, 1728, 1745, 1747-1756, 1769, 1770, 1772-1776
1 Transmittal #M-6592
#1656
- --------------------------------------------------------------------------------
</TABLE>
FLEET CAPITAL CORPORATION EAGLE GEOPHYSICAL ONSHORE, INC.
By: /s/ David E. Mitchell By: /s/ R. W. McNairy
-------------------------------------- -------------------------------
Name: David E. Mitchell Name: R.W. McNairy
Title: Vice President/Sr. Lender Title: Vice President,
Secretary/Treasurer
By: /s/ Jay N. Silverman
-------------------------------
Name: Jay N. Silverman
Title: President & CEO
<PAGE> 7
SCHEDULE A-1 LOCATION
Attached to and made part of the following documents: Equipment Security
Agreement Schedule No. 32567-01 and Insurance Certification.
The Equipment is currently located at:
LOC# (01): 50 Briar Hollow Lane, 6th Floor West
Houston, Texas 77027
FLEET CAPITAL CORPORATION EAGLE GEOPHYSICAL ONSHORE, INC.
By: /s/ David E. Mitchell By: /s/ Richard W. McNairy
-------------------------------- -------------------------------
Name: David E. Mitchell Name: R.W. McNairy
Title: Vice President/Sr. Lender Title: Vice President,
Secretary/Treasurer
By: /s/ Jay N. Silverman
-------------------------------
Name: Jay N. Silverman
Title: President & CEO
<PAGE> 1
EXHIBIT 10.12
PROMISSORY NOTE
Fixed Rate/Fixed Installments
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
$5,864,880.00 April 30, 1998
For value received, the undersigned (jointly and severally if more than
one) promises to pay to the order of Fleet Capital Corporation ("Lender"),
having its principal place of business in Providence, Rhode Island (together
with any other holder of this Note, hereinafter referred to as the "Holder"),
the principal sum of $5,864,880.00, together with interest thereon as provided
herein. This Promissory Note is one of the "Notes," and the obligations of the
undersigned hereunder are "Obligations" secured by the "Collateral," as such
terms are defined or referred to in Equipment Security Agreement Schedule No.
32567-00001 between the undersigned and Lender dated as of FEBRUARY 11, 1998
(the "Security Agreement").
This Note shall be payable by the undersigned to Holder in 60 consecutive
installments of principal and interest (the "Payments") commencing on June 5,
1998 and continuing MONTHLY thereafter through and including May 5, 2003 (the
"Maturity Date"). Each Payment shall be due and payable on the same day of the
month as the initial Payment set forth above in each succeeding payment period
during the term of this Note (each, a "Payment Date"). Interest shall accrue on
the entire principal amount of this Note outstanding from time to time at a
fixed rate of 7.36% per annum (the "Interest Rate"), from the date hereof until
the principal amount of this Note is paid in full, and shall be due and payable
on each Payment Date. All interest hereunder shall be calculated on the basis of
a year of 360 days comprised of 12 months of 30 days each. Payments of principal
and interest hereunder shall be due and payable on each Payment Date in the
amounts set forth and corresponding to each of the numbered Payments listed
below:
<TABLE>
<CAPTION>
Payment No(s): Payment Amount
-------------- --------------
<S> <C> <C>
1-60 $117,130.39
</TABLE>
Interim interest shall accrue on the entire principal amount of this Note
from the date hereof through and including May 5, 1998, at the rate of $1199.04
per day, which interest shall be due in addition to the Payments set forth above
and shall be payable on the first Payment Date set forth above. The final
Payment due and payable on the Maturity Date shall in any event be equal to the
entire outstanding and unpaid principal amount of this Note, together with all
accrued and unpaid interest, charges and other amounts owing hereunder and under
the Security Agreement.
The entire unpaid principal balance of this Note may be prepaid in full
(but not in part) upon thirty days prior written notice to Holder, provided that
any such prepayment shall be made together with (a) all accrued interest and
other charges owing hereunder or under the Security Agreement, and (b) a
prepayment fee equal to: 5% of such prepayment if made prior to the first
anniversary of this Note;
<PAGE> 2
thereafter, 4% of such prepayment if made prior to the second anniversary of
this Note; thereafter, 3% of such prepayment if made prior to the third
anniversary of this Note; thereafter, 2% of such prepayment if made prior to the
fourth anniversary of this Note; thereafter, 1 % of such prepayment if made
prior to the fifth anniversary of this Note; and thereafter no prepayment fee
shall be required.
Time is of the essence in the payment and performance of those Obligations
which are evidenced by this Note. In the event any amount due hereunder is not
paid within ten (10) days of the date when due, the undersigned agrees to pay an
administrative and late charge equal to the lesser of (a) five percent (5%) on
and in addition to the amount of such overdue amount, or (b) the maximum charges
allowable under applicable law, In addition, the undersigned shall pay overdue
interest on any delinquent Payment or other Obligation due (by reason of
acceleration or otherwise) from thirty (30) days after the due date thereof
through the date of payment thereof at a rate of interest equal to the lesser
of: (a) 1.5 % per month, or (b) the maximum rate of interest allowable under
then applicable law.
Each payment hereunder shall be made in lawful money of the United States
and shall be payable to such account or address as Holder shall from time to
time direct the undersigned. Whenever any payment to be made under this Note
shall be stated to be due on a Saturday, Sunday or a public holiday, or the
equivalent for banks generally under the laws of the State of Rhode Island, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of the payment of interest. Ali
amounts received hereunder or in respect of this Note shall be applied first, to
accrued late charges and any other costs or expenses due and owing hereunder or
under the terms of the Security Agreement; second, to accrued interest; and
third, to unpaid principal. It is the intention of Holder to comply with all
applicable usury laws. Accordingly, it is agreed that notwithstanding anything
to the contrary contained herein, in no event shall any provision contained
herein require or permit interest in excess of the maximum amount permitted by
applicable law to be paid by the undersigned. If necessary to give effect to
these provisions, Holder will, at its option, in accordance with applicable law,
either refund any amount to the undersigned to the extent that it was in excess
of that allowed by applicable law or credit such excess amount against the then
unpaid principal balance hereunder.
Failure to pay this Note or any installment hereunder promptly when due,
or the occurrence of an "Event of Default" under the Security Agreement, or
default or failure in the performance or due observance of any of the terms,
conditions or obligations under any other agreement or instrument between the
undersigned (or any endorser, guarantor, surety or other party liable for the
undersigned's obligations hereunder, or any other entity controlling, controlled
by, or under common control with the undersigned) and Holder (or any other
entity controlling, controlled by or under common control with Holder), shall
constitute a default hereunder and entitle Holder to accelerate the maturity of
this Note and to declare the entire unpaid principal balance and all accrued
interest and other charges hereunder (including prepayment fees calculated as of
the date of default) and under the Security Agreement to be immediately due and
payable, and to proceed at once to exercise each and every one of the remedies
provided in the Security Agreement or otherwise available at law or in equity.
The undersigned and all other parties who may be liable (whether as
endorsers, guarantors, sureties or otherwise) for payment of any sum or sums due
or to become due under the terms of this Note waive diligence, presentment,
demand, protest, notice of dishonor, notice of intention to accelerate, notice
of acceleration and notice of any other kind whatsoever and agree to pay all
costs incurred by Holder in enforcing its rights under this Note or the Security
Agreement, including reasonable attorney's fees, and they do hereby consent to
any number of renewals or extensions at any time in the payment of this Note.
2
<PAGE> 3
No extension of time for payment of this Note made by any agreement with any
person now or hereafter liable for payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of the
undersigned under this Note, either in whole or in part. No delay or failure by
Holder hereof in exercising any right, power, privilege or remedy shall be
deemed to be a waiver of the same or any part thereof; nor shall any single or
partial exercise thereof or any failure to exercise the same in any instance
preclude any future exercise thereof, or exercise of any other right, power,
privilege or remedy, and the rights and remedies provided for hereunder are
cumulative and not exclusive of any other right or remedy available at law or in
equity. The Holder of this Note may proceed against all or any of the Collateral
securing this Note or against any guarantor hereof, or may proceed
contemporaneously or in the first instance against the undersigned, in such
order and at such times following default hereunder as Holder may determine in
its sole discretion. All of the undersigned's obligations under this Note are
absolute and unconditional, and shall not be subject to any offset or deduction
whatsoever. The undersigned waives any right to assert, by way of counterclaim
or affirmative defense in any action to enforce the undersigned's obligations
hereunder, any claim whatsoever against the Holder of this Nate.
THIS NOTE AND THE LEGAL RELATIONS OF THE UNDERSIGNED AND HOLDER SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW.
THE UNDERSIGNED HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
RHODE ISLAND FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING
OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT
MAY HAVE TO THE VENUE OF SUCH COURTS. THE UNDERSIGNED HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS
NOTE.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its duly authorized representative as of the date first above written.
ATTEST/WITNESS: MAKER: EAGLE GEOPHYSICAL ONSHORE, INC
/s/ Barbara Poindexter By: /s/ R.W. McNairy
- ---------------------------------- -------------------------------------
Name: Barbara Poindexter Name: R. W. McNairy
----------------------------- -----------------------------------
Title: Vice President, Secretary,
Treasurer
----------------------------------
By: /s/ Jay N. Silverman
-------------------------------------
Name: Jay N. Silverman
-----------------------------------
Title: President and CEO
----------------------------------
3
<PAGE> 1
EXHIBIT 10.13
GUARANTY
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
This Guaranty (this "Guaranty") is executed and delivered as of the date set
forth below by the undersigned guarantor (the "Guarantor") in favor of Fleet
Capital Corporation ("FCC"). FCC may, from time to time, enter into agreements
with EAGLE GEOPHYSICAL ONSHORE, INC. of 50 Briar Hollow Lane, 6th Floor West,
Houston, TX 77027 ("Obligor"). The term "Obligor," if defined to include more
than one party, shall mean "Obligor and each of them" and this Guaranty shall
secure payment of all of their respective Obligations (hereinafter defined) to
FCC. FCC is unwilling to enter into such agreements with Obligor, unless
Guarantor absolutely and unconditionally guarantees to FCC the payment and
performance of all obligations of Obligor at any time owing to FCC. With
knowledge that FCC will enter into agreements with or extend financial
accommodations to Obligor in reliance upon the existence of this Guaranty and
the validity and enforceability of the obligations and liabilities of Guarantor
to FCC contemplated hereby, Guarantor agrees with FCC as follows:
1. Guaranty. Guarantor guarantees to FCC the prompt payment and/or performance
of all indebtedness, obligations and liabilities of Obligor at any time owing to
FCC, whether direct or indirect, matured or unmatured, primary or secondary,
certain or contingent, or acquired by or otherwise created in favor of FCC (the
"Obligations"). This Guaranty is a guaranty of payment and not a guaranty of
collection. Guarantor guarantees to FCC the punctual and faithful performance by
Obligor of each and every Obligation, all without offset or deduction for any
reason. Guarantor shall be deemed to be primarily liable on any agreement,
document or instrument evidencing any Obligation and will for all purposes be
deemed to be a party to any such writing whether or not the undersigned has
specifically executed or endorsed such writing.
2. Continuing Nature of Guaranty; Revocation. This Guaranty is a continuing
guaranty and shall in all respects be valid and enforceable without regard to
the form or the amount of the Obligations in existence at any time. Guarantor
may prospectively revoke this Guaranty by sending written notice, certified
mail, return receipt requested, to FCC at the address for FCC specified above
(the "Revocation Notice"). The revocation of this Guaranty shall not be
effective with respect to any Obligation arising on or prior to the date
occurring fifteen (15) days after FCC's receipt of the Revocation Notice (the
"Revocation Date"), or to any Obligation arising at any time after the
Revocation Date if such Obligation arises as the result of a commitment made by
FCC to Obligor on or prior to the Revocation Date.
3. Absolute, Unconditional, Joint and Several Nature of Guaranty. The
obligations of Guarantor hereunder are absolute and unconditional, and shall be
joint and several with each Guarantor executing this Guaranty and each other
party that may be liable, directly or indirectly, for the payment or performance
of any of the Obligations. If this Guaranty is executed by more than one party,
the term "Guarantor" as used herein shall mean (unless the context otherwise
requires) "the Guarantor and each of them" and each and every undertaking shall
be their joint and several undertaking. If Obligor is a partnership, the
obligations of Guarantor herein contained shall remain in full force and effect
notwithstanding any changes in the individuals comprising the partnership, and
the term "Obligor" shall include any altered or successive partnerships.
Guarantor shall not be released from any obligations under or in respect of this
Guaranty for any reason, nor shall such obligations be reduced, diminished or
discharged for any reason, including:
(a) Modifications and Indulgences. Any modifications, renewals, or
alterations of any agreement, document or instrument relating to any
Obligation, or any indulgences,
<PAGE> 2
adjustments, preferences, extensions or compromises made by FCC in favor
of Obligor or Guarantor or any other party.
(b) Condition of Obligor or Guarantor. Any insolvency, bankruptcy,
arrangement, adjustment, composition, liquidation, disability,
dissolution or similar proceeding affecting Obligor or Guarantor; any
sale, lease or other disposition of any of the assets of Obligor or
Guarantor; any reorganization of, or change in the composition of the
shareholders, partners or members of, Obligor or Guarantor; or any
termination of, or other change in, the relationship between Obligor and
Guarantor.
(c) Invalidity of Obligations or Other Agreements. The invalidity,
illegality or unenforceability of any Obligation for any reason
whatsoever, including, but not limited to: the existence of valid
defenses, counterclaims or off-sets to any Obligation; the violation of
applicable usury or other laws by any Obligation; or the lack of
authenticity or genuineness of any document or instrument relating to
the Obligations. This Guaranty shall be in addition to any other
guaranty or other security for the Obligations, and it shall not be
prejudiced or rendered unenforceable by the invalidity or
unenforceability of any such other guaranty or security.
(d) Release of Obligor. Any complete or partial release of Obligor or any
other party liable for any Obligation for any reason.
(e) Release and Care of Collateral; Status of Liens. Any release, surrender,
exchange, deterioration, waste, loss or impairment of any real or
personal property transferred or assigned by any party as collateral
securing payment of any Obligation (the "Collateral"), whether negligent
or willful; the failure of FCC or any other party to exercise reasonable
care in the preservation, protection, sale or other treatment of any of
the Collateral; the failure of FCC to create or properly perfect any
mortgage, pledge, transfer or assignment of any Collateral intended to
be given by or for the benefit of the Obligor in connection with any
Obligation (a "Lien"); the unenforceability of any Lien; the
subordination of any Lien to any other lien or encumbrance; or the
taking or accepting by FCC of any other security for, or assurance of
payment of, any Obligation.
(f) Other Action or Inaction. Any other action or inaction on the part of
FCC, whether or not such action or inaction prejudices Guarantor or
increases the likelihood that Guarantor will be required to pay or
perform any Obligation pursuant to the terms hereof.
It is the obligation of Guarantor to discharge the Obligations when due,
notwithstanding any occurrence, circumstance, event, action or omission
whatsoever, whether or not particularly described herein. Guarantor is not
entering into this Guaranty in reliance on the value or the availability of any
of the Collateral. Guarantor acknowledges that Guarantor may be required to pay
the Obligations, in full, without the assistance or support of any other party.
Guarantor has not been induced to enter into this Guaranty on the basis that any
party other than Obligor will be liable to perform any Obligations or that FCC
will look to any other party to perform any Obligation. FCC may release, or
settle with, the Obligor or any Guarantor or any other party. liable, directly
or indirectly, for the performance of any Obligation, all without affecting the
liability of any other party to this Guaranty. To the extent that this Guaranty
is secured by property of Guarantor, FCC shall not be obligated to release its
security interest in such property until all applicable preference periods have
passed with respect to payments of Obligations made to FCC.
4. Default; Performance of Obligations If Obligor defaults in the payment or
performance of any Obligation, if there exists any event or condition which,
with notice and/or the passage of time, would constitute a default under any
document, agreement or instrument evidencing an Obligation, or if there is
2
<PAGE> 3
a liquidation, bankruptcy, assignment for the benefit of creditors or similar
proceeding affecting the status, existence, assets or obligations of Obligor or
any Guarantor or other party liable to FCC in respect of the Obligations, then
the obligations of Guarantor hereunder shall, at the option of FCC, become
immediately due and payable and Guarantor shall pay directly to FCC the sums
which Obligor is obligated to pay to FCC, whether by acceleration or otherwise,
and promptly perform all other Obligations. Guarantor shall be liable, as
principal obligor and not as a surety or guarantor only, for all attorneys' fees
and other costs and expenses incurred by FCC in connection with FCC's
enforcement of this Guaranty, together with interest on all amounts recoverable
under this Guaranty, compounded monthly in arrears, from the time such amounts
become due and payable until the date of payment at the lesser of FCC's then
current late charge rate of interest or the highest rate permitted by applicable
law. If FCC is required to return any payment made to FCC by or on behalf of
Obligor, whether as a result of Obligor's bankruptcy, reorganization or
otherwise, Guarantor acknowledges that this Guaranty covers all such amounts,
notwithstanding that the original of this Guaranty may have been returned to
Guarantor and/or otherwise canceled.
5. Waivers. Guarantor waives:
(a) Action Against Others. Any right to require FCC to: institute suit or
exhaust remedies against Obligor or any other party liable for any
Obligation; enforce FCC's rights in any of the Collateral or other
security which is at any time given to secure any Obligation; enforce
FCC's rights against any other Guarantor or any other party liable on
any Obligation; join Obligor or any other party liable for any
Obligation in any action seeking to enforce this Guaranty; or exhaust
any other remedies available to FCC or resort to any other means of
obtaining payment or performance of any Obligation.
(b) Notices. Notice of the execution, delivery or acceptance by FCC, Obligor
or any other party, of this Guaranty or any document, agreement or
instrument evidencing any Obligation; notice of the amount of credit
extended by FCC to Obligor at any time, whether primary or secondary;
notice of modifications or extensions of any Obligation; notice of
defaults, or other non-performance by Obligor in connection with any
Obligation; notice of the transfer or disposition by FCC of any
Obligation; notice of the repossession, sale or other disposition of any
of the Collateral; notice of the acceptance of this Guaranty by FCC;
demand and presentation for payment upon Obligor or any other party
liable for any Obligation; protest, notice of intention to accelerate or
notice of acceleration of any Obligation, notice of protest and
diligence in bringing suit against Obligor or any other party; and any
other action or inaction on the part of FCC in connection with this
Guaranty or any Obligation.
(c) Notices. Any right which Guarantor may at any time have against Obligor,
or any other party liable for any Obligation, as a result of the
performance by Guarantor of its obligations under this Guaranty,
including, but not limited to contractual, statutory and common law
rights of subrogation, reimbursement, indemnification, set-off or
contribution, until all Obligations owing to FCC have been paid and
performed in full.
(d) Suretyship Defenses. Any defenses which Guarantor may have or assert
against the enforcement of this Guaranty or any Obligation based upon
suretyship principles or any impairment of Collateral.
6. Representations and Warranties. Guarantor represents and warrants to FCC
that:
(a) Benefit. Guarantor has received, or will receive, substantial benefit
from the agreements and transactions giving rise to the Obligations and
this Guaranty.
3
<PAGE> 4
(b) No Representation by FCC. Neither FCC nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty.
(c) Access to Information. Guarantor has adequate means to obtain continuing
and sufficient information concerning the financial and business
condition of the Obligor and other parties liable in respect of the
Obligations.
(d) Financial Condition; Solvency. As of the date hereof, and after giving
effect to this Guaranty and the contingent obligations contained herein,
Guarantor is solvent and has assets which, when fairly valued, exceed
its liabilities.
(e) Financial Statements. (i) within 120 days after the last day of each
fiscal year of Guarantor, consolidated financial statement including a
balance sheet, income statement, statement of retained earnings and a
statement of cash flows each prepared in accordance with generally
accepted accounting principles consistently applied with a report signed
by an independent certified public accountant satisfactory to FCC; and
(ii) within 45 days after the close of each quarter of each fiscal year
of Guarantor, consolidated financial statements similar to those
described in the immediately preceding clause, prepared by Guarantor and
certified by the chief financial officer of Guarantor.
(f) Financial Covenants. Guarantor shall comply, with all of the following
financial covenants:
i. Current Ratio. Guarantor shall maintain a Current Ratio, of not
less than 1 .1 5 to 1, determined as of the end of Guarantor's
fiscal year.
ii. Minimum Tangible Net Worth. Guarantor's minimum Tangible Net Worth
shall be not less than (a) $45,000,000.00 or (b) 95% of the equity
raised by the August 11, 1997, initial public offering of the
common stock, plus 70% of positive Net Income determined as of the
end of Guarantor's fiscal quarter .
iii. Minimum Quarterly Cash Flow. Guarantor's ratio of cash flow to
Debt Service.
iv. Disparity between proforma and audited results for fiscal year
1997. Guarantor's audited figures for Guarantor's fiscal year 1997
shall not be qualified or materially different from the proforma
information that Lender has already received and reviewed.
v. Certification of Compliance. Guarantor will furnish, within 45
days of the end of Guarantor's fiscal quarter, and within 120 days
of each Guarantor's fiscal year end, a Compliance Certificate,
substantially in the form of Exhibit A hereto, certified by
Guarantor's chief financial officer, as to the compliance with the
above-referenced covenants.
For purposes of calculating the foregoing covenants, the following definitions
shall apply:
"Cash Flow" shall be defined as the sum of net income plus depreciation and
other non-cash charges less non-cash income of Guarantor.
"Current Assets" shall mean at any time, all assets that should in accordance
with GAAP, be classified as current assets.
4
<PAGE> 5
"Current Liabilities" shall mean at any time, all liabilities that should in
accordance with GAAP, be classified as current liabilities.
"Current Ratio" shall be defined as Current Assets divided by Current
Liabilities, excluding current maturities of long term debt.
"Debt Service" shall be defined for any fiscal quarter as the sum of (a)
principal amounts required to be paid during such quarter on indebtedness other
than in connection with Guarantor's revolving line of credit with Bank One,
Texas, N.A., plus (b) lease payments required to be paid during such quarter in
connection with capital leases, plus (c) the outstanding principal balance due
at the beginning of such quarter on Guarantor's revolving line of credit with
Bank One, Texas, N.A., divided by sixteen.
"GAAP" shall mean generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Person" means an individual, company, corporation, partnership, limited
partnership, joint venture, trust, association, unincorporated organization or a
government or any agency or political subdivision thereof.
"Tangible Net Worth" means the total assets of Guarantor exclusive of (a) those
assets classified as intangible, including, without limitation, goodwill,
patents, trademarks, trade names, copyrights, franchises and deferred charges,
(b) treasury stock and minority interests in any Person, (c) cash set apart and
held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of capital stock, (d) to the extent not already
deducted from total assets, allowances for depreciation, depletion, obsolescence
and/or amortization or properties, uncollectible accounts, and contingent but
probable liabilities as to which an amount can be established, (e) deferred
taxes and (f) all assets arising from advances to officers, former officers or
sales representatives of Guarantor made outside of the ordinary course of
business; less total liabilities of Guarantor.
All other financial terms contained herein that are not specifically defined
herein shall have meanings determined in accordance with GAAP. The foregoing
covenants shall be calculated based on Guarantor's consolidated financial
statements.
7. Subordination. Guarantor further agrees that: (i) all present and future
indebtedness of Obligor to Guarantor ("Subordinated Debt") shall be and hereby
is subordinated to the Obligations; (ii) Guarantor shall not demand, nor accept
from Obligor or any other person, any payment or transfer of property on account
of the Subordinated Debt and shall not cancel, set-off or otherwise discharge
any part of the Subordinated Debt; and (iii) Guarantor contemporaneously
herewith and from time to time hereafter shall on request deliver to FCC any and
all documents, instruments, notes or certificates evidencing any such
indebtedness. Notwithstanding the foregoing, so long as there is no event of
default under any agreement associated with the Obligations or the Subordinated
Debt, Guarantor may receive and Obligor may pay (but not prepay) scheduled
installment payments of principal and/or interest from Obligor strictly in
accordance with the-terms of the documents and instruments evidencing the
Subordinated Debt, provided, however, that in no event may any Subordinated Debt
be prepaid (whether or not permitted or contemplated by the terms of such
documents or instruments) without the prior written consent of FCC.
5
<PAGE> 6
Upon the request of FCC, Guarantor shall deliver to FCC a certified statement of
the outstanding Subordinated Debt, specifying in detail the time at which
permitted payments were made, if any.
8. Governing Law; Miscellaneous. THIS GUARANTY AND THE LEGAL RELATIONS OF THE
PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES
REGARDING THE CHOICE OF LAW. GUARANTOR CONSENTS TO THE JURISDICTION AND VENUE OF
RHODE ISLAND COURTS IN CONNECTION WITH FCC'S ENFORCEMENT OF ANY OBLIGATIONS
UNDER OR IN RESPECT OF THIS GUARANTY. GUARANTOR HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS
GUARANTY. Time is of the essence in the payment and performance of all
Obligations and all of Guarantor's obligations and liabilities owing to FCC
hereunder. This Guaranty shall not be deemed to create any right in any party
except as provided herein and shall inure to the benefit of, and be binding
upon, the successors and assigns of Guarantor and FCC. This Guaranty constitutes
the entire agreement of Guarantor and FCC relative to the subject matter hereof,
and there are no prior or contemporaneous understandings or agreements, whether
oral or in writing, between the parties hereto with respect to the subject
matter hereof. No subsequent modification of, or supplement to, this Guaranty
shall be enforceable against any party hereto unless the same is in writing and
is duly signed by an authorized officer or representative of the party against
whom enforcement is sought. Guarantor agrees that FCC may, without the consent
of, or notice to, Guarantor, assign all or any portion of its rights hereunder
to any other party to which all or any portion of the Obligations are
transferred, assigned or negotiated (an "Assignee"), and Guarantor shall execute
and deliver to FCC upon FCC's request such further and additional documents,
instruments and assurances as FCC deems necessary (a) in order to acknowledge
and confirm for the benefit of FCC or any Assignee all of the terms and
conditions this Guaranty and FCC's or Assignee's rights with respect thereto,
and Guarantor's compliance with all of the terms and provisions hereof and (b)
to preserve, protect and perfect FCC's or Assignee's right, title or interest
hereunder and in any Collateral or other property securing any Obligations or
any obligations of Guarantor owing to FCC or any Assignee, including without
limitation, such UCC financing statements or amendments, corporate resolutions,
certificates of compliance, notices of assignment or transfers of interests, and
restatements and reaffirmations of Guarantor's obligations owing to FCC or any
Assignee and its representations and warranties with respect thereto as of the
dates requested by FCC from time to time.
6
<PAGE> 7
The undersigned, pursuant to due corporate or partnership authority, as
appropriate, has or have caused this Guaranty to be executed as of the date set
forth below.
Dated as of: January 28, 1998
Witness/Attest/Notary Public: CORPORATE GUARANTOR:
/s/ Barbara Poindexter EAGLE GEOPHYSICAL, INC.
- ---------------------------------------
Name: Barbara Poindexter By: /s/ R. W. McNairy
---------------------------------- -----------------------------------
Address: 50 Briar Hollow Lane, GW Name: R.W. McNairy
------------------------------- ---------------------------------
Houston, Texas 77027 Title: Vice President - CFO/Secretary
- --------------------------------------- --------------------------------
Taxpayer ID: 76-0522659
--------------------------
By: /s/ Jay N. Silverman
-----------------------------------
Name: Jay N. Silverman
---------------------------------
Title: President and CEO
--------------------------------
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 1.,
FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,912
<SECURITIES> 0
<RECEIVABLES> 13,391
<ALLOWANCES> (450)
<INVENTORY> 3,032
<CURRENT-ASSETS> 50,177
<PP&E> 146,381
<DEPRECIATION> (22,363)
<TOTAL-ASSETS> 200,862
<CURRENT-LIABILITIES> 59,137
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 83,566
<TOTAL-LIABILITY-AND-EQUITY> 200,862
<SALES> 34,336
<TOTAL-REVENUES> 34,336
<CGS> 22,527
<TOTAL-COSTS> 30,203
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294
<INCOME-PRETAX> 3,795
<INCOME-TAX> 1,537
<INCOME-CONTINUING> 2,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,258
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
